Imagine that you are a bitcoin bull (BTC), safe prices will join, but first anticipating a setback. However, like many people, he is not an expert in perfectly timing such market entries and feels that he can lose the optimal moment to load in the upward exhibition.
For merchants who face this common situation, a structured product known as the other call can offer a convincing solution.
A backback call is an exotic option that gives the holder the right to buy the underlying asset at its lowest price observed during the so -called backrest period.
For example, instead of trying to choose the exact lower part of the current BTC price setback from the maximum record, a merchant can consider a three -month -old lookback with a one -month support period.
That means that the exercise price is established at the lowest value in the first month, and the call can be exercised at that level at any time before the option expires three months after the looksback period. So, if the price of BTC fell to $ 100,000 in the initial month before increasing, for example, $ 140,000 within the next three months, the holder could demand that the issuer sell BTC at $ 100,000.
The unique structure of the option guarantees that the call buyer benefits from ensuring the perfect fall, maximizing its profit potential by eliminating the need for a precise market. That is in marked contrast with a traditional purchase option of a centralized exchange, where merchants must select a fixed exercise price, significantly increasing the risk of a suboptimal entry.
“BTC Spot remains close to its maximums, but the implicit volatility has collapsed. This combination makes the backward options particularly attractive from a perspective of risk reward,” said Polkit Goyal, head of orbit trade in the markets, to Coindesk. “With implicit volatility at such low levels, the backup function offers a perfect entry for additional limited cost.”
Orbit Markets, an OTC desktop specialized in structured options and products, suggested a three -month recoil call to its customers, which will establish the strike at the lowest Bitcoin price in the next four weeks. The suggestion underlines a growing demand for sophisticated risk management tools and highlights the growing maturity of the cryptographic derivative market.
The benefit of the perfect entry has an additional cost. Orbit’s Backback call is priced at 12.75% cousin, which makes it 3.5% more expensive than a 3 -month regular automatic cashier call, which costs 9.25%. The issuer of the option is to assume the risk that BTC can fall, forcing them to give it a more favorable exercise price. As a buyer, pay that unique benefit.
What happens if BTC does not fall?
It is perfectly possible that BTC will be immediately recovered from the market rate running around $ 115,000 and remains higher during the next four weeks before recovering more at $ 140,000 at the end of the next three months.
In this case, the exercise price is set at $ 115,000 after the one -month looks end, giving the head of the call the right to buy BTC at $ 115,000 in maturity.
In other words, despite the fact that prices were not initially immersed, the call buyer still had a good entry, which benefits from the posterior ascending movement.
Risk profile
The buyer of the Backback purchase option can lose the initial premium paid if BTC is blocked at levels below the year -set price after a month.
The risk profile, therefore, is similar to that of a standard purchase option.
3:09 UTC: Corrects the costs associated with the call backwards and the standard call mentioned in the ninth para.
