Bitcoin could soon break out. Trading the move with options on this proxy stock
I generally steer clear of trading spot bitcoin . The extreme volatility and high capital requirements don’t fit my preferred risk profile. However, avoiding the asset doesn’t mean ignoring the sector. I prefer to participate in the crypto space through equity proxies — stocks that move in lockstep with digital assets — using the same option spread strategies I apply elsewhere. My favorite vehicle for this approach is MicroStrategy (MSTR) . While MSTR is an excellent proxy, it has been trapped in a persistent downtrend since July. For a long trade to work here, we cannot look at the stock in isolation; we need confirmation from the mothership. Bitcoin itself has been under pressure since October, but it is finally showing signs of life. Looking at the BTC futures chart, we see the asset attempting to carve out a bottom, but it is currently battling a critical ceiling of resistance around $94,000. If bitcoin can decisively break through this $94,000 barrier, it will likely act as a rising tide for the entire sector, unlocking a wealth of setups. MicroStrategy will be at the top of my list when that breakout occurs. To find a bullish setup on MSTR, I am using the following indicators: RSI (Relative Strength Index) After languishing in a flat range for months, the RSI has suddenly pivoted. We are seeing a sharp, vertical trajectory in momentum, which directly validates the potential for a powerful bounce from these levels DMI: The internal dynamics of the trend are shifting. The DI+ and DI- lines, which track buying and selling pressure, are beginning to curl and change direction. This convergence is often the first technical clue that the prevailing trend is losing its grip and a reversal is imminent. Support/Resistance: (The Bitcoin Correlation) Finally, my most critical resistance level isn’t on the MSTR chart at all. As noted earlier, I am anchoring this entry to the underlying asset. I am waiting for Bitcoin to decisively clear the $94,000 resistance level. Until that ceiling is breached, the “all-clear” signal remains off. The trade setup: MSTR 165-170 bull call spread Predicated on a bitcoin breakout, this strategy allows us to capture significant upside in MSTR with minimal price movement. I am utilizing a bull call spread designed to effectively “sandwich” the current price action. If MicroStrategy is trading near $166 when the signal triggers, I would construct the spread by buying the $165 call just below the market and simultaneously selling the $170 call just above it. This specific structure can be entered for as little as $250 per contract, making it incredibly easy to scale. The math is compelling: the trade delivers a full 100% ROI if the stock simply drifts higher and closes at or above $170 by expiration. Effectively, we are positioning ourselves to double our capital on a move of less than $5. Here is my exact trade setup: Buy $165 call, Jan 30th expiry Sell $170 call, Jan 30th expiry Contracts: 1 Cost: $250 Potential Profit: $250 -Nishant Pant Founder: https://tradewithmaya.com/ Author: Mean Reversion Trading Youtube, Twitter: @TheMeanTrader DISCLOSURES: None. All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
