View on market
I anticipate that BTC may experience a sideways to bearish trend in the coming days, influenced by the subdued reaction to the Bitcoin Halving, the flows of US Bitcoin ETFs, and significant open interest (OI) buildup at the $70,000 strike price. For traders looking to navigate this market, the bear call spread strategy could be a suitable approach to consider.
Bear Call Spread
The proposed strategy is a Bear Call Spread. A bear call spread is achieved by simultaneously selling a call option and buying a call option at a higher strike price but with the same expiration date.
You might consider initiating this trade if you believe that BTC can see more sideways to bearish days of the week.
Trade Structure
(OTM Call) Sell 1x BTC-26APR24-$69,000-C @ $460
(OTM Call) Buy 1x BTC-26APR24-$70,000-C @ $300
Target: Spot level < $70,000
Payouts
Maximum Profit: $160/BTC
Why are we taking this trade?
As highlighted in my previous insights, both the BTC halving event and the flows of US BTC ETF haven’t stirred much excitement in the market. Similarly, the approval of spot Bitcoin and Ether ETFs by Hong Kong regulators has also received a lukewarm response by the market. We’re encountering notable resistance levels, especially since they are formed after breaking through key support levels, as shown in the attached 4-hour BTC price chart. Additionally, we’ve observed a significant Open Interest (OI) buildup at the $70,000 strike for the April 26th expiry, which adds to the view that the BTC can face challenges in moving higher. Hence, traders can take advantage of the sideways to downside view on BTC with the help of bear call spread strategy.
To execute this strategy, traders can sell a call option of a higher strike price, eg. $69,000, while simultaneously purchasing a call option at an even higher strike price, like $70,000.
In case of market upturn, the maxim loss is limited to $840 , Maximum loss of Bear Call spread = Difference between strike prices of calls ($69,000 – $70,000) – Net Credit ($160).
How to take this trade on Deribit?
Step 1: Go to Combo books under the Strategy tab & Create combo.
Step 2: Click RFQ and send your order to the Combo List.
Step 3: Go to Combo list (BTC), click on your Strategy and execute.
Disclaimer
This report must not be used as a singular basis of any trading decision. The document includes analysis and views of our research team. The document is purely for information purposes and does not constitute trading recommendation/advice or an offer or solicitation of an offer to buy/sell any contract.
