Posted on 08/05/2025 6:50:08 PM PDT by NoLibZone
A lookback call option allows traders to buy bitcoin at its lowest price during a specified period, offering a strategic advantage over traditional call options.
This type of option is particularly appealing at times of low implied volatility, providing a 'perfect entry' for a slightly higher premium, Orbit Markets said.
If bitcoin prices do not drop, the lookback call still offers a favorable entry point, but the buyer risks losing the initial premium if prices fall below the strike price.
Imagine you're a bitcoin bull, confident prices will rally, but anticipating a pullback first. Like many people, however, you are not adept at perfectly timing such market entries and feel you may miss the optimal moment to load up on bullish exposure.
For traders facing this common predicament, a structured product known as a lookback call may offer a compelling solution.
A lookback call is an exotic option that gives the holder the right to buy the underlying asset at its lowest observed price during the so-called lookback period.
For instance, instead of trying to pick the exact bottom of the current BTC price pullback from record highs, a trader may consider a three-month lookback with a one-month lookback period.
That means the strike price is set at the lowest value in the first month, and the call can be exercised at that level anytime before the option expires three months after the lookback period.
So if the BTC price dropped to $100,000 in the initial month before rising to, say, $140,000 within the following three months, the holder could require the issuer to sell BTC at $100,000.
The option's unique structure ensures the call buyer benefits from securing the perfect dip, maximizing their profit potential by eliminating the need for precise market timing. That's in stark contrast a traditional call option from a centralized exchange, where traders must select a fixed strike price, significantly increasing the risk of a suboptimal entry.
"BTC spot remains near its highs, but implied volatility has collapsed. This combination makes lookback options particularly attractive from a risk-reward perspective," Pulkit Goyal, head of trading at Orbit Markets, told CoinDesk. "With implied volatility at such low levels, the lookback feature offers perfect entry for limited extra cost."
Orbit Markets, an OTC desk specializing in options and structured products, suggested a three-month lookback call to its clients, which will set the strike to the lowest bitcoin price over the next four weeks. The suggestion underscores a growing demand for sophisticated risk-management tools and highlights the increasing maturity of the crypto derivatives market.
The benefit of perfect entry comes at an extra cost. Orbit’s lookback call is priced at 12.75% premium, making it 3.5% more expensive than a regular 3-month ATM call, which costs 9.25%. The issuer of the option is taking on the risk that BTC might drop, forcing them to give you a more favorable strike price.
As a buyer, you pay extra for that unique benefit.
What if BTC doesn't drop?
It's perfectly possible that BTC immediately rallies from the going market rate of around $115,000 and stays higher over the next four weeks before rallying further to $140,000 by the end of the following three months.
In this case, the strike price is fixed at $115,000 after the one-month lookback period ends, giving the call holder the right to buy BTC at $115,000 on expiry.
In other words, even though the prices didn't dip initially, the call buyer still got a good entry, profiting from the subsequent upward move.
Risk profile
The buyer of the lookback call option stands to lose the initial premium paid if BTC crashes to levels below the strike price fixed after one month.
The risk profile, therefore, is similar to that of a standard call option.
Just buy it and forget about it.
Bitcoin derivatives sound like a really bad idea.
no no no 130 got to add the premium cost.
“Buy it and forget”
I
think everyone should have a buy and hold portfolio ..
But a “play account can be a lot of fun
Better then a bass boat.
Adrenalin is a heck of a drug.
“past week has been like stealing your neighbors car with a couple of your drunk buddies...
...without the crash ...so far...
HODL. Period.
I have a taste of IBIT .... a bit coin etf.
It's done well . It’s in my buy hold pile.
I got in early when they first stated trading the etf.
At the time I was just looking for a simple way to get in crypto ..with no idea what it was.(still no idea)
I trade options .... but I would have to look at these a while before I touch one.
Let me see if I get this......
for the first month the strike has a backward trailing stop...
then for the next three months I can buy at that price..?
For 12.75%
I think most options favor the seller... but the favor is decided by chart trends.
Fundamentals and extraordinary events can swing that.
Right off the bat ... I would say buying one is a poor idea..
but selling one would be a reasonable insurance policy.
it's that 12.75% hmmm .....all in all I think you may be right ... bad idea
Exactly.
It could go down to about $106k without a lot of effort. I expect it to do exactly that.
If you have a moment ... and a handle on the method of these options ... could run through a simple strategy that may be viable in the next few months?
I'm really interested in these things now that I know about them.
Put in an order at an absurdly low price. Then forget about it. One day you could wake up to a great entry you forgot about.
I also have IBIT. I also trade options (sell). IBIT seems too thinly traded to be a good option stock.
“IBIT seems too thinly traded “
40 million a day, average premium ......(I don’t know crypto)
But now that I look at it...seems like it could work... but I don’t want to due the work to learn it ..
ibit ...green 1.28% so far
What do you think about these look back calls?
.... I imagine this may come into the “real” market ?
I buy and sell, but am always more careful buying
My red to green trade ratio is about 1.5 to 1 red ...
but my profit /loss ratio keeps me green.
Better then a bass boat!
I accidentally did that once.....
Turned out to be one of the best moves ever...
But now I just trust my monkey ..... that guy can sure throw a dart.
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