BCH Bull: Beginner strategies
So you now know how BCH Bull works, but do you know how to make it work for you? What do you have in mind, and how can BCH Bull help you get there?
I just want to hold value in Dollars (or Euros, or gold... or BTC even)
Your case is the simplest - you hedge your BCH in your asset of choice.
What you care about are:
1. Your desired duration of hedging. You would want to pick something reasonable - while you can terminate contracts early via Early Settlement, that can get quite pricey sometimes. You want to know roughly when you might need the coins for other purposes.
2. Minimize fees, or maximize returns. Yes, you often gets rewarded for taking the hedge side. Go to bchbull.com/premiums, scroll down to your asset of choice. Check for the green sign on the left boxes. Some assets may offer better premiums, but you would have to consider whether switching to that asset is worth it.
Balance the two, and you'll hopefully be a happy camper.
I want to speculate, I want volatility, and I'm bullish on BCH.
So you think BCH is going to go up - welcome to the club! Specifically, you think it's going to go up relative to some other assets - USD, gold, ETH, you name it. Time to click the speculate button.
What you care about are:
1. Your desired leverage. It's important to note that just hodling BCH is considered "1X" in BCHBULL terms, so all longs starting from 1.2x will net you more BCH than hodling as BCH goes up. The higher your leverage is, the more you gain in BCH when price goes up, but you can get liquidated earlier if price goes down, so be careful!
2. Your desired duration of longing. Same as hedging, you'll want to pick something reasonable. Getting out early can be expensive, doing multiple short contracts instead of one long contract can be expensive.
3. Your desired counterparty leverage. The higher the counterparty leverage, the easier it is for your counterpart to be liquidated, but the potential upside for this contract becomes more limited.
4. Minimize fees, or maximize returns. Yup, that's where the premiums come in, and you want to consider whether you want to go for the specific combination of duration, leverage and counterparty leverage that you really want, or maybe you're a little flexible to get the best premium. Start from bchbull.com/premiums then try different combinations, sometimes a difference of just a couple days may surprise you!
I want to speculate, I want volatility, and I'm bearish on BCH.
So you think BCH is going to go down, and you're gonna get more BCH on the way. Welcome to BCHBull's latest feature, leveraged shorts! Specifically, you want to bet that BCH will go down relative to some other assets - USD, EUR, BTC (!), you name it. We certainly hope BCH isn't going down versus BTC, but if that happens, you can get more BCH off that...
What you care about are almost identical to the longs above, just that instead of profiting when BCH go up, you profit when BCH comes down relative to your chosen asset. You get liquidated on your way up, and you may liquidate your counterparty on the way down. Check the premium page, play around with duration and leverages, and be the bear!
I want to thread the needle and play market volatility both ways.
Neutralizing via matching hedges
So you have some BCH and you decided you want to minimize risk. Longs have BCH downside risk, shorts have BCH upside risk, you don't want either, and want to get as close to hodl'ing BCH as possible.
The basic concept to understand here is neutralizing contracts: If you hold two opposing contracts - one long, one hedge or short - for any given price movement, they might add up to give you zero gain/loss. The way this happens is by having the same "nominal value" amount.
If you have two contracts, one long and one hedge/short have the same "nominal value" amount, then you will end up not gaining or losing no matter the price movement - unless you get liquidated, that is.
For hedges, this is easy: Nominal hedge = Your hedge input.
For shorts, Nominal hedge = Your short input * Your leverage. For example, a 5x short who put in $100 would have a nominal value of $500.
For longs, Nominal value = Your long input * (Your leverage - 1). For example, a 5x long who put in $100 would have a nominal value of $400. To get a matching $500 nominal value on this leverage, you would need to put in $125 in BCH instead of $100.
If you enter two contracts at the same time, one as long and one as short, with identical nominal values such as the examples above, you will not gain or lose a sat no matter how the price moves (until liquidation).
Play the premiums
One obvious way to play neutrality is by arbitraging premium differences. For example, you may see the following:
A 7-day USD hedge pays you 2% in premium, displayed on the BCHBull UI as "-2%".
A 7-day EUR 5x asks for a 0.5% premium fromlong you, displayed on the BCHBull UI as "+0.5%".
You can punch in two neutralizing contracts, and you may find out that they add up to a _net_ premium in your favor. As long as you believe USD/EUR price won't move too much within 7 days, you can profit from this immediately by taking these two neutralizing contracts, and just get your capital back in 7 days!
Low risk, immediately profitable premium setups aren't always available. What if you want to add some prediction skill to this? That's for the next article: Playing different durations.
