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BTC hints pause on selling pressure at 4-week low trend line, hinting at possible upside retracement as ETF inflows signal improvement.
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 might consider executing this trade if your short-term outlook is for retracements in BTC prices.
Trade Structure
(OTM Call) Buy 1x BTC-6APR24-$68,500-C @ $260
(OTM Call) Sell 2x BTC-6APR24-$70,000-C @ $115
(OTM Call) Buy 1x BTC-6APR24-$71,000-C @ $65
Target: Spot level < $70,000
Payouts
Maximum Profit: $1,405/BTC
Debit of Strategy: $95/BTC
Why are we taking this trade?
On reviewing the lows of the past four weeks in BTC, it becomes evident that we’re currently aligned with a trendline as per marking done in the attached chart. This suggests the possibility of BTC exhibiting retracements to the upside. Additionally, analyzing the BTC ETF inflow data of 3rd April shows a net buy of $113.5 million, this data indicates an improvement compared to recent days marked by selling activity.
Therefore, traders anticipating retracements in BTC’s price may consider capitalizing on this rationale through a call butterfly spread strategy.
To execute this approach, traders can purchase a call option with a higher strike price (e.g., $68,500) while simultaneously selling double the quantity of calls at a higher strike price (e.g., $70,000) and buying a call at an even higher strike price (e.g., $71,000).
If the Bitcoin price is at $70,000 when the options expire on April 6th, traders will achieve maximum profit from this strategy.
In case of a market downturn, the potential loss is limited to the initial debit of $95.
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.
