Bitcoin traders are anticipating a potential rally if the Federal Reserve (Fed) implements a 0.50% rate cut, but they are also taking measures to hedge their bullish positions to mitigate risks. As Bitcoin has struggled to close above the $62,000 level since August 3 and experienced an 11% decline over the past 30 days, professional traders are turning to options strategies to maximize gains while limiting potential losses.

Investors believe that risk markets, including Bitcoin, could witness significant gains if the Fed decides to cut interest rates. However, they are also cautious about sudden price swings that could lead to forced liquidations. Despite some market players already factoring in a 0.50% rate cut, predicting market reactions on the proposed September 18 date remains challenging.

The price action of Bitcoin suggests that its performance has been overshadowed by concerns within the cryptocurrency sector, with some attributing its subdued performance to the perceived lack of support from Democrat nominee Kamala Harris. Gemini exchange co-founder Tyler Winklevoss has criticized what he calls "Operation Choke Point 2.0," claiming that the Harris crypto "reset" is a scam. Winklevoss cites the Fed's recent actions against a crypto-friendly bank and a federal court ruling that could have negative implications for the industry.

Meanwhile, the CME FedWatch tool reveals a 25% chance of a 0.50% interest rate cut on September 18, leading many traders to anticipate a potential rally. Instead of taking on the risks associated with leveraged futures positions, professional traders are utilizing options strategies to hedge against unexpected price movements.

One such strategy is known as a "risk reversal," which aims to protect against losses stemming from price swings. This strategy involves holding call options while funding their purchase by selling put options. By doing so, traders eliminate the risk of the asset trading sideways and limit their downside risk.

Traders are implementing this options structure, focusing on September 20 options, although similar approaches can be applied to various maturities. The structure involves purchasing 3.5 BTC put options at $58,000 to guard against a downward move. Additionally, traders sell 3.4 BTC put options at $60,000 to secure returns above that level. Finally, traders acquire 3.8 BTC call options at $65,000 for positive price exposure.

This option structure ensures no gains or losses between $60,000 and $65,000. The trader is betting that Bitcoin's price at 8:00 am UTC on September 20 will surpass this range, thereby accessing unlimited profits with a maximum potential loss of 0.12 BTC (worth $7k).

If Bitcoin rallies to $67,100, representing a 14% increase, this strategy would result in a 0.12 BTC gain, which is also the maximum potential loss. In the event that BTC gains 20% to $70,700, the strategy would yield a return of 0.30 BTC (worth $21.2k), with the potential upside significantly surpassing the limited downside. While there is no initial cost for this options structure, a margin deposit of 0.12 BTC is required to cover the exposure.

The market remains uncertain amidst discussions about potential rate cuts, industry concerns, and market volatility. Traders are taking proactive measures to hedge their positions using options strategies to minimize risks and maximize potential gains. However, it is essential for investors to seek professional advice and exercise caution in navigating these complex financial instruments.

Disclaimer: This article is intended for general informational purposes only and does not constitute legal or investment advice. The views and opinions expressed in this article are solely those of the author and do not necessarily reflect the official policy or position of Cointelegraph.