View on market
I anticipated a bullish environment which is getting validated by significant inflows into US BTC ETFs. While BTC briefly breached the flip zone, retracements post the breach were not significant hence, traders can expect continued bullish momentum and look to deploy a call butterfly strategy.
Call Butterfly Spread
The proposed strategy is a Call Butterfly Strategy. A Butterfly spread with calls is a three-part strategy that is created by buying one call at a lower strike price, selling two calls with a higher strike price and buying one call with an even higher strike price.
You can consider executing this strategy if you are eyeing upward movement in BTC prices.
Trade Structure
(OTM Call) Buy 1x BTC-10MAY24-$66,000-C @ $365
(OTM Call) Sell 2x BTC-10MAY24-$67,000-C @ $225
(OTM Call) Buy 1x BTC-10MAY24-$68,000-C @ $140
Target: Spot level < $67,000
Payouts
Maximum Profit: $945/BTC
Debit of Strategy: $55/BTC
Why are we taking this trade?
In my recent Insights, I anticipated a bullish outlook on BTC based on both macroeconomic factors and favorable technical setups. The recent developments seem to confirm this trend, especially evident in the significant inflows observed in US BTC ETFs, totaling $217 million on May 6th. (Source: GBTC daily flow, Farside Investors).
Furthermore, the pivotal flip zone highlighted in yesterday’s analysis was breached by BTC prices but prices failed to sustain above it, which was somewhat anticipated. Flip zones, often indicative of support transitioning to resistance, are crucial price zones. But BTC prices did not witness any notable rejections or significant retracements, and managed to rebound, suggesting continued bullish momentum.
While traders can expect the bullish sentiment to persist, it’s worth noting that BTC can encounter resistance around the next resistance/supply zone at $67,000. Therefore, traders might consider deploying a call butterfly strategy at this juncture.
To execute this approach, traders can purchase a call option with a higher strike price (e.g., $66,000) while simultaneously selling double the quantity of calls at a higher strike price (e.g., $67,000) and buying a call at an even higher strike price (e.g., $68,000).
If the Bitcoin price is at $67,000 when the options expire on May 10th, traders will achieve maximum profit from this strategy.
In case of a market downturn, the potential loss is limited to the initial debit of $55.
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.
