Bitcoin Price Crosses $40,000 USD
First Time Since May 2022
Spot Bitcoin’s price recently1 crossed $40,000:
Year-to-date in 2023, Bitcoin has outperformed almost all major global equity, fixed income, and commodities indices2
Is Bitcoin Going To $20,000 or $100,000 Next?
One of the biggest mistakes in investing is to think you can time the market. The truth is: you can’t predict short term price movements3.
But here is what we know about Bitcoin:
It is a technological breakthrough that allows for digital ownership of an asset that no one entity controls
It behaves like a digital gold or commodity
It is increasingly being used for settlement, payment, or store of value
If you think Bitcoin could go higher over long run, you should think like a professional investor or trader: risk management.
How to Think Like a Professional
Here is the investing mental framework of the best investors in the world:
Begin with the end in mind. Have an investing goal and stick to it. 4
Set asset allocation as a % of total portfolio.
Set proper risk expectations: know your return targets vs max loss possible.
Actively monitor performance vs expectations.5
💭 Top investors and traders globally, be they individuals or institutions, typically share a similar mental approach.
But Most Investors Fumble On Risk…
Mike Tyson once said:
“Everyone has a plan: until they get punched in the face”
In the context of investing: properly risk managed portfolios allows you to take “punches”6, whether you anticipate them or not. That’s why risk management is so important.
Always be asking: what’s the worst thing the market can do to your portfolio?
Yet most investors fumble on risk management. Why? Because it can be so arbitrary.
Especially Bitcoin: it is statistically possible, and probable, that Bitcoin may +/- 70% in a given year7.
How do you plan to deal with that? Or more importantly, how to control your greed or fear if it moves up or down very quickly?
Here is our experience.
Use Options Like Professional Money Managers
At Fig Investments, we use options as tools to help investors capture returns on assets with defined risks.
What do we mean by this?
If you have heard of options before, you would know they can be used to:
Speculate
Hedge
Most importantly:
Options give investors a controlled exposure on an asset with defined risk. 8
Using our proprietary framework, we combine option positions9 together in define structures, called structured notes, to help investors capture returns on Bitcoin while controlling max loss.
A Case Study
We recently helped an investor capture up to 70% of the recent upside on Bitcoin
While controlling the maximum portfolio draw down to 12%.
Bitcoin went up 50% in during the period and the investor captured 35% of the gains while knowing they cannot lose more than 12% of their principal at any given point in time.
Result:
We help the investor to create options portfolio that gave them a controlled exposure to Bitcoin with defined target returns while hedged with a max drawdown.
The Only Surgical Investment Tool
Sophisticated investors use options to methodically capture returns, not to purely speculate.10
Building a proper options portfolio requires lots of
Thought,
Math, and
With end goal in mind.
However, options are complicated. They are high dimensionality instruments that has different:
Maturity dates
Strike prices
Trading and liquidity venues
Option greeks like delta, gamma, theta, etc
Margin requirements
Managing all these factors can be a headache - even for most professionals.
That’s where Fig Investments come in.
Learn More
Backed by our decades of experience in trading, portfolio management, and hyper scale software backgrounds, Fig Investments specialize in using options as tools to help our customers to capture returns on Bitcoin.
To learn more, book a free 1-1 call with us 👇
Or alternatively, visit our website at https://fig.investments.
Thank you for reading!
Disclaimer: The information provided in this blog post is for educational and informational purposes only and is not intended as financial advice. The content is not meant to provide, and should not be relied upon for investment, accounting, legal, or tax advice. You should consult your own financial, legal, tax, or other professional advisors before engaging in any transaction. The views expressed on this blog are the author's own and do not necessarily reflect the views of any financial institutions or other entities. Investing in financial markets involves risks, and there is always the potential of losing money when you invest in securities. Past performance is not indicative of future results.
As of December 3rd, 2023.
MSCI World Index is proxied by ticker: URTH, which is the iShares MSCI World ETF. Gold performance is proxied via iShares Gold Trust. Crude oil return is proxied via rolling returns of NYMEX Crude Oil Futures (CL)’s front end continuous rolling contracts. Canadian equities return is approximated via the S&P TSX 60 Index.
This should include:
Investing style: active vs passive
Return targets such as a purchase or lifestyle goals
Risk tolerance: how much loss can you take before panicking
Constraints based on particular circumstances such as allowable investment vehicles and etc.
Monitoring performance is not the same as frequent trading - which most people should not do.
In the form of risk events.
This number is derived from the implied volatility of ATM Bitcoin call options maturing in approximately 30 days as of December 4, 2023. Implied volatility is how much the market “thinks” the price of Bitcoin will move in a year, either up or down, which is baked into option prices for Bitcoin.
“Defined” does not mean “limited” necessarily. Some option structures have unlimited losses. The important thing is that you know what the structure looks like before you enter into a position. That’s what makes it powerful.
We combine options with a variety of different securities such as fixed income to hedge certain dimensionality.
Contrary to blindly buying naked call options on stocks hoping the asset would land in the money - akin to lottery ticket.