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Prospective Ethereum ETF issuers are awaiting SEC updates on their S-1 form submissions, with technical indicators suggesting a continued uptrend in ETH prices. Meanwhile, June’s lower-than-expected CPI signals a potential rate cut, and spot Bitcoin ETFs see positive inflows, suggesting a Bull Call Spread strategy might be advantageous for traders.
Bull Call Spread
The proposed strategy is a Bull Call Spread. A Bull Call Spread consists of one long Call with a lower strike price and one short Call with a higher strike price. Both Calls have the same underlying and the same expiration date. It is established for a net debit (or net cost) and profits as the underlying price increases.
You may consider taking this trade if you expect the ETH price to increase.
Trade Structure
(OTM Call) Buy 1x ETH-26JUL24-$3,300-C @ $65
(OTM Call) Sell 1x ETH-26JUL24-$3,500-C @ $32
Target: Spot level > $3,500
Payouts
Maximum Profit: $167/ETH
Debit of Strategy: $33/ETH
Why are we taking this trade?
Ethereum ETF Issuers Await SEC Updates
Prospective Ethereum ETF issuers are eagerly awaiting updates from the U.S. Securities and Exchange Commission (SEC) on their pending launches, following the submission of their latest S-1 forms on July 8. After the approval of their 19b-4 forms in May, issuers have been in a back-and-forth with the SEC over the second part of the two-step process: the S-1 forms.
June CPI and Market Expectations
The June Consumer Price Index (CPI), released on Thursday by the U.S. Bureau of Labor Statistics, came in slightly lower than economist forecasts. This lower-than-expected reading signals a significant slowdown in inflation, potentially reinforcing the market’s expectation of a rate cut in September.
The Bureau announced that the unadjusted annual core CPI rate for June was 3.3%, slightly below the market expectation of 3.4%, marking the lowest level since April 2021. The seasonally adjusted monthly core CPI rate for June was 0.1%, also below the market expectation of 0.2% and the lowest level since August 2021.
Bitcoin ETF Inflows and Ethereum Options Metrics
Spot Bitcoin ETFs have logged $78.9 million in net inflows, marking the fifth consecutive day of positive flows which suggests a bullish environment in the crypto space (Source: Farside Investors).
Additionally, examining the options metrics for Ethereum for July 26 reveals high open interest at the $4,000 strike (Source: Deribit Options Metrics).
From a technical perspective, the attached 4-hour ETH price chart indicates that Ethereum has formed a short-term low. The recovery is evident as short-term resistance levels are being breached without notable retracements. This pattern suggests that the uptrend is likely to continue, and final approval of the Ethereum ETF could occur within the month which can be a catalyst for prices to increase.
Therefore, traders might consider deploying a Bull Call Spread strategy to capitalize on this anticipated price movement based on the above analysis.
To implement this strategy, traders can buy a Call option at a lower strike price (e.g., $3,300) and simultaneously sell a Call option at a higher strike price (e.g., $3,500).
If ETH prices are at or above $3,500 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 $33.
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 (ETH), 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.
