Investment company Calamos has launched a new investment strategy aimed at limiting the downside potential of Bitcoin. Bitcoin (BTC) is increasingly attracting institutional investors, but many still consider it too risky. To address this, global investment firm Calamos introduced its 'Protected Bitcoin' strategy on June 7, designed to limit the downside and upside exposure to Bitcoin. The company noted that despite Bitcoin's valuation reaching $2 trillion, institutional investors remain concerned about its volatility. As a result, most institutional investors allocate only 1–2% of their portfolios to BTC to avoid excessive risk exposure. Calamos has built its strategy by combining Bitcoin futures with U.S. Treasury bonds to provide some upside participation while managing risk. Specifically, the company purchases zero-coupon U.S. Treasury bonds that mature at the end of the year. These bonds serve as a protective floor in predefined worst-case scenarios, limiting losses to 0%, 10%, or 20%, depending on the risk level. Meanwhile, Calamos buys call options on Bitcoin indices to capture potential gains. To fund this, the company also sells out-of-the-money call options, effectively capping the upside potential between 25% and 60%. Each risk-return level is benchmarked against familiar asset classes. The 100% protected Bitcoin level reflects the risk profile of U.S. Treasuries, offering capital preservation with virtually no downside risk. The second level is comparable to gold or alternative assets, while the third level aligns with equities in terms of expected return and volatility. Calamos believes that this structured approach can enhance Bitcoin's appeal relative to traditional assets. However, timing remains critical. Traders must hold positions until expiration to benefit from downside protection; early exits may result in principal loss. While rare, another risk includes potential sovereign debt defaults, which the company notes is extremely unlikely to occur.

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