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The German government has sold another 1,000 bitcoins, causing significant price drops, with recent Mt. Gox repayments adding to market volatility. Traders may consider a Put Butterfly strategy as Bitcoin has violated the support level of $60,000.
Put Butterfly Strategy
The proposed strategy is a Put Butterfly strategy. A Butterfly Spread with Puts is a three-part strategy that is created by buying one Put at a higher strike price, selling two Puts with a lower strike price and buying one Put with an even lower strike price.
You can consider executing this strategy if you are eyeing downward movement in BTC prices.
Trade Structure
(OTM Put) Buy 1x BTC-12JUL24-$54,000-P @ $290
(OTM Put) Sell 2x BTC-12JUL24-$53,000-P @ $200
(OTM Put) Buy 1x BTC-12JUL24-$52,000-P @ $142
Target: Spot level > $53,000
Payouts
Maximum Profit: $968/BTC
Debit of Strategy: $32/BTC
Why are we taking this trade?
In an ongoing selling spree, the German government has transferred another 1,000 bitcoins. LookOnChain has identified two wallets that have moved a total of 9,500 BTC, worth approximately $537 million. These transfers have coincided with significant drops in the price of bitcoin, suggesting that major players may be selling off their holdings. (Source: The Block)
The recent activity in the crypto market has been further disrupted by the movement of bitcoin linked to the hacked exchange Mt. Gox, which is currently repaying creditors in both bitcoin and bitcoin cash. This has added additional volatility to the market.
Crucial support levels for bitcoin have been broken during this sell-off, as seen in the attached daily chart. The price trend is currently downward, with a potential support area around $53,000 where the price may stabilize.
Given this situation, traders might consider using a Put Butterfly strategy to capitalize on the anticipated price movements.
To execute this approach, traders can purchase a Put option with a higher strike price (e.g., $54,000) while simultaneously selling double the quantity of Puts at a lower strike price (e.g., $53,000) and buying a Put at an even lower strike price (e.g., $52,000).
If the Bitcoin price is at $53,000 when the options expire on July 12th, traders will achieve maximum profit from this strategy.
In case of a market upturn, the potential loss is limited to the initial debit of $32.
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.
