Bitcoin I challenged the expectations of significant volatility in August, quoting within a range. As market dynamics indicate a continuous regime of low volatility in the short term, 10x Research highlights “short strangulation” as an ideal play.
“Given the current dynamics in the Bitcoin option market, a short premiere looks very suitable for next month. With Bitcoin that quotes around $ 113,000 and an expected range between $ 95,000 and $ 125,000, selling money out of money out of money [September expiry] Put about $ 95,000 along with money out of money [September expiry] Call about $ 125,000 provides the opportunity to capture the premium, “said Markus Thielen, a 10X Research founder, in a report to customers on Thursday.
The short premiere implies a simultaneous writing (sale) Of the highest strike calls out of money and the lowest otm strike feels with the same expiration, positioned equidistant of the spot price of the underlying asset.
The strategy is similar to the sale of insurance against bullish and bearish movements in exchange for a premium, which represents the maximum rear gain if the spot price remains between the two draw prices: $ 95,000 and $ 125,000 in this case.
Sale options (or Strangles) It is a common strategy when implicit volatility (IV) It exceeds the volatility carried out, since this allows merchants to capture richer premiums, and the market is expected to remain relatively stable.
“The strategy works because the implicit volatility curve is quoted above the levels made, the signaling options are too expensive and the market is unlikely to deliver large movements outside its defined range in the short term,” said Thielen. “The options imply the structure of the volatility term indicates short -term calm.”
Implicit volatility (IV) The structure of the term is a graphic representation that shows how volatility is expected to evolve in different future temporary horizons. In general, it is an ascending slope, reflecting an uncertainty and growing risk as the expiration time lengthens.
Risk reward profile
BTC needs to continue negotiating between $ 95,000 and $ 125,000 for the suggested strategy to generate profits. Rangewound trade will reduce the demand for calls and OTM positions, which exhausts the premium of these options and generating a gain for strangulators.
Thielen’s previous recommendation at the beginning of August was also a short premiere, which involved a $ 105,000 call and a $ 130,000 call. This strategy generated a 3.5%yield.
However, keep in mind that short strangulations carry significant risks, particularly in case of sudden increase in volatility, which can lead to substantial losses. Therefore, operators must continually monitor the position and market variables relevant to manage the risk effectively.
Read more: Bitcoin went to $ 190K in institutional wave, says the research firm
