The research firm favored the Bitcoin "secured chokehold" strategy to boost portfolio returns by 17%

Research firm 10X recommends that bitcoin holders use options strategies to boost portfolio returns by 17%. Specifically, they recommend selling virtual value (OTM) call options and put options linked to Bitcoin while holding spot Bitcoin. This option strategy, known as a "secured chokehold," was able to generate an additional 17 percent gain on top of holding bitcoin in the spot market.

The "secured chokehold" strategy involves holding the underlying asset in the spot market while selling OTM call options above the current market price of the underlying asset and OTM put options below the spot price of the underlying asset. Selling a call option protects the counterparty from rising prices, while selling an option is insurance against a falling trend, and the premium gained represents an additional gain.

10X recommends selling a call option with a strike price of $100,000, which is 50% higher than Bitcoin's current market price, and selling a call option with a strike price of $50,000, both of which expire in December 2024, while holding bitcoin in the spot market. "Our favorite strategy is to buy Bitcoin spot, sell a $100,000 strike call, and sell a $50,000 strike call, so that the options expiring in December 2024 provide an 11% gain and a 6% gain, respectively," 10X Research founder Marcus Thilen said in a client note Monday detailing the recommendation. "So this strategy gives us a 17% downside buffer or 17% more gain, depending on Bitcoin's closing price in December, plus we capture all of Bitcoin's upside (or downside)," he added.

This strategy is preferred in situations where the market outlook is bullish but the uptrend is expected to unfold slowly, which keeps implied volatility, or investors' expectations of price movements, low. Under such conditions, options, especially OTM call and put options, disappear in value more quickly as the expiration date approaches, creating gains for the seller.

While this strategy is attractive, it is not without risk and requires a high risk tolerance. This is because the risk is amplified below the strike price of the put option, which in this case is $50,000. In an explanation of the covered strangle strategy, Fidelity says: "Below the strike price, both spot holdings and short put options incur losses, and as a result, the percentage loss is twice that of a covered put position alone."

In other words, the 10X strategy is for those who believe that the Bitcoin bull market will proceed slowly and that a correction will not bring the price below $50,000. At the time of writing, bitcoin is trading at $67,170, up 58 percent year-to-date, according to CoinDesk data. Several analysts, including Thielen and former BitMEX crypto exchange CEO Arthur Hayes, expect Bitcoin to climb slowly.