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On Wednesday, U.S. spot BTC ETFs saw a net inflow of $303 million, driving Bitcoin to break through the Flip Zone. However with declining trading volumes and resistance at $66,600 level, traders can consider shorting OTM calls.
Short Call
The proposed strategy is a Short Call. A short call strategy is one of the simple ways options traders can take bearish positions. It involves selling call options, or calls.
You might consider initiating this trade if you believe that BTC can face hurdles in price to move higher from the supply zones.
Trade Structure
(OTM Call) Sell 1x BTC-18MAY24-$69,000-C @ $305
Target: Spot level < $69,000
Payouts
Maximum Profit: $305/BTC
Why are we taking this trade?
On May 15th, U.S. spot BTC ETFs experienced a total daily net inflow of $303 million (Source: Farside Investors). This influx contributed to a Bitcoin rally, enabling the price to break through the flip zone, as shown in the attached 4-hour BTC price chart. Consequently, Bitcoin reached the next resistance level at $66,600, which had previously shifted the trend from sideways to downward by forming Lower Highs (refer to the attached BTC chart).
Trading volumes on the ETFs have been steadily declining since its peak in March, according to The Block’s Data Dashboard.
The current supply zone/resistance level may act as an obstacle to BTC’s continued upward movement, as there are signs of rejections from this supply zone. Traders might take advantage of these resistance levels by shorting out-of-the-money calls, such as at the $69,000 level.
It’s important to note that a sudden surge in volatility leading to a substantial upward movement would be bad, due to the position’s short call exposure.
How to take this trade on Deribit?
Step 1: Go to Bitcoin Options
Step 2: Select Expiry, Strike and execute your Strategy.
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.
