View on market
Bitcoin found a bottom at $53,700 and began a recovery, with positive BTC spot ETF inflows all week. However, significant resistance and high open interest at the $67,000 level could pose a challenge for further price increases.
Call Butterfly Spread
The proposed strategy is a Call Butterfly Spread 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-26JUL24-$66,000-C @ $1140
(OTM Call) Sell 2x BTC-26JUL24-$67,000-C @ $875
(OTM Call) Buy 1x BTC-26JUL24-$68,000-C @ $660
Target: Spot level < $67,000
Payouts
Maximum Profit: $950/BTC
Debit of Strategy: $50/BTC
Why are we taking this trade?
As mentioned in my latest insights, Bitcoin found a bottom around $53,700 and subsequently began a recovery, forming higher highs. Additionally, BTC spot ETF inflows were positive throughout the entire week.
Upon examining the 4-hour chart of BTC, it appears that the price may encounter resistance around the $67,000 level due to significant resistance in place. Furthermore, options data for July 26th indicates a very high open interest at the $67,000 strike, suggesting that while the price might continue to rally, surpassing the $67,000 level could pose a challenge for further price increase (Source: Deribit Options Metrics).
For traders, looking to capitalize on this analysis in BTC, implementing a Call Butterfly Spread strategy could be advantageous.
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 BTC price is at $67,000 when the options expire on July 26th, traders will achieve maximum profit from this strategy.
In case of a market downturn, the potential loss is limited to the initial debit of $50.
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.
