Bullish Crypto Options Strategies: Types and Working Process

The world of cryptocurrencies has its ups and downs. Similarly, a trader will have bearish or bullish sentiments depending on whether he/she expects the asset’s price to go up or down. To capitalise on market opportunities, a crypto trader must be adaptable and pick a strategy that works for the current environment. Bullish crypto strategies are used by traders when they anticipate an uptrend for a cryptocurrency. While buying call options is the simplest way to make profits, there are several trading strategies that provide better downside protection. Here we have discussed some bullish crypto strategies in detail. Read along.

Covered Call

To execute this bullish strategy, you need to buy a cryptocurrency normally while simultaneously selling/writing a call option of the same asset. In other words, it uses a long and a short position on the same asset. It is a common crypto trading strategy employed by traders with a bullish to neutral outlook on the price of a cryptocurrency. An asset’s price is not expected to change considerably when using this strategy. The goal of this crypto trading strategy is to generate income by selling a call option while limiting downside risks with a regular long position. For instance, if you purchase 100-200 tokens for the long position, you will typically write 1-2 call options against it. Thus, if the crypto’s price shoots up suddenly, losses from your short position will be covered by purchased assets. A trade-off for this strategy is that you must be willing to sell off your crypto assets at the short call strike price.

Protective Put (Married Put)

Like the previous strategy, this one involves purchasing a cryptocurrency for a long position. However, instead of selling a call option, you have to buy a put option for the same asset. A protective or married put is meant for you if you have bullish sentiments for an asset but feel uncertain about its price movement. This bullish option strategy aims to protect downside risk while holding a regular long position. Its main function is to hedge the trader's long position. If the token’s price falls sharply, the options holder can sell his/her assets at the preset strike price. Thus, his/her losses are limited to the premium amount and losses due to a decrease in the asset's price. If the prices increase, he/she will lose only the premium amount while profiting from his/her long position.

Protective Collar

This bullish crypto trading strategy also involves holding a long position like the previous two examples. But you also have to purchase an OTM (out-of-the-money) put option and write (sell) an OTM call option. Both of these options will have the same expiration date and cryptocurrency as their underlying asset. This strategy is used by traders for downside protection using the long put. However, they are obligated to sell off the asset (on which they have a long position) if the OTM call option is exercised. Seems confusing? Let's understand this with an example. Suppose ETH is trading at $1890 in July and you expect it to keep increasing for the next months. You already own 30 ETH and want to protect your long position. So, you sell one ETH September 1920 call and purchase one ETH September 1860 put. If the price falls below $1860, your position is fully covered. However, if ETF trades above $1920 upon expiry, you will be forced to sell at that price. The volatility of cryptocurrencies like Ethereum (ETH) makes this type of options trading an ideal way of limiting risks. Register here by just providing your email ID and trade ETH options.

Bull Call Spread

This is a bullish option strategy that involves simultaneously buying and selling the same number of call options. The expiration date and underlying cryptocurrency will be the same but the strike prices will be different. The call options bought will be of lower strike price than the options sold. The purpose of a bull call spread is to limit your potential losses if the cryptocurrency falls in value below the strike price of the purchased calls (with a lower strike price). This strategy is used when traders are bullish on the underlying token but expect only a moderate increase in its price. When using this strategy, your losses will be limited to the spread costs (difference between premiums paid and received) if both call options expire worthless. However, its downside is that your potential profits are limited to the total strike prices of both options minus the net cost of premiums.

Long Straddle

This is one of the best bullish options strategies when a trader does not know in which direction a cryptocurrency will move but does anticipate a significant movement. It involves purchasing a call and a put option for a token with the same strike price and expiration date. Theoretically, a crypto trader can make unlimited profits using this strategy. Potential losses are limited to the premiums paid for the call and put option. Traders will break even when the asset price moves significantly in any direction. In other words, they need not care whether a token increases or decreases in price as long as it compensates for the cost of premiums paid. A long straddle is a popular options strategy for crypto trading, but you need a full understanding of how this strategy works to use it.

Long Strangle

This bullish options strategy is similar to a long straddle but less expensive. In a long strangle, a trader needs to purchase an out-of-the-money call option and an OTM put option. Both of them have the same underlying asset and expiration date but different strike prices. A trader who uses this strategy expects the asset price to move significantly but is uncertain of the direction of its movement. Generally, traders utilise this strategy when they are awaiting any news or announcement like new projects, earnings reports, regulatory developments, etc. It allows his/her to get unlimited potential profit with bullish movements but limits his/her downsides to the cost of premiums plus trading fees. Both options expire worthless if the asset price is equal to or between any of the two strike prices.

Iron Condor

This crypto trading strategy uses a bull put spread and a bear call spread. For the former, you will need to sell an OTM put option and buy another OTM put with a lower strike price. For the latter, you need to sell an OTM call option and buy an OTM call with a higher strike price. All of these options will have the same expiration date and underlying token. This strategy aims to earn a net premium by utilising call and put spreads with the same width. It is a consistently profitable crypto trading strategy if used on a token experiencing low volatility as it provides a high possibility of earning a small premium. However, if the price moves away significantly, traders will experience losses higher than the maximum possible gains. This does not make the Iron Condor strategy redundant due to its high probability of profits.

Long Call Butterfly Spread

Also, called a Bull Butterfly Spread, this bullish options strategy involves a bull spread and a bear spread. To execute this strategy, you need to buy a call option, sell 2 more call options with a higher strike price and buy another call option at an even higher strike price. In total, the strategy uses 4 call options with 3 different strike prices but the same expiration date. Typically, the spread will be a ratio of 1:2:1 with one in-the-money option, 2 at-the-money options and 1 out-of-the-money option. You should use this strategy when you expect the crypto price to not fluctuate much. Bull Butterfly Spreads aim to limit the risk of a potential downside. It also limits your potential profits to the difference between the middle strike price and the lowest strike price minus net premiums paid and brokerage fees. The maximum loss is equal to the sum of the options' premiums.

Final Words

While crypto options trading may seem complicated if you are new to it, a little familiarity with the technicalities and the trading strategies will make everything clear. The above-mentioned bullish options strategies will help you to make profits even in a volatile market and keep your losses limited. Just remember to do your due diligence and assess all the associated risks before trading.

FAQS

Q1: What are bullish crypto options strategies?

Bullish crypto options strategies are structured trades using call and/or put options designed to profit when the underlying asset (e.g. BTC or ETH) rises in price. They range from simple long calls to multi-leg spreads that reduce cost or limit risk. Platforms like Delta Exchange provide tools that help traders construct and execute these strategies efficiently.

Q2: What are the main types of options trading strategies?

The main types of options trading strategies include directional strategies that profit from price moves, neutral or non-directional strategies such as straddles and strangles that profit from volatility, income strategies such as covered calls or cash-secured puts that generate premium, and hedging strategies such as protective puts used to manage downside risk.

Q3: What is a covered call strategy in crypto?

A covered call involves holding a crypto asset (e.g. BTC) and selling a call option at a strike above the current price. You collect the premium immediately as income. If BTC stays below the strike at expiry, the option expires worthless and you keep both the premium and your BTC. If BTC surges past the strike, your upside is capped but you still profit.

Q4: What is a bull call spread?

A bull call spread involves buying a call at a lower strike and simultaneously selling a call at a higher strike with the same expiry. The short call reduces the premium cost of the long call. Profit is capped at the difference between strikes minus the net premium paid. It is a lower-cost alternative to buying a plain call when you expect a moderate price rise.

Q5: What is a protective put (married put)?

A protective put involves holding a crypto asset and buying a put option on it. If the asset falls, the put gains value, offsetting losses. It acts as insurance on your holdings. The cost is the premium. This strategy is ideal for traders who are long-term bullish on BTC or ETH but want downside protection during uncertain periods.

Q6: Which bullish strategy is best for beginners?

The long call is one of the simplest bullish strategies, where a trader buys a call option and profits if the asset rises above the strike by expiry. The maximum loss is limited to the premium paid. For beginners seeking lower cost exposure, a bull call spread is another commonly used strategy. Many platforms offer demo accounts where traders can practise these strategies before using real capital.