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BTC is facing resistance from the overhead Flip zone but has a Support area around $59,700, which altered its trend. Expecting sideways movement, traders may consider a Short Strangle strategy amid choppy price action.
Short Strangle
The proposed strategy is a Short Strangle. A short strangle consists of one short call with a higher strike price and one short put with a lower strike. Both options have the same underlying and the same expiration date, but they have different strike prices.
You may take this trade if you think BTC will play in the range of $65,000 and $57,000.
Trade Structure
(OTM Call) Sell 1x BTC-11MAY24-$65,000-C @ $90
(OTM Put) Sell 1x BTC-11MAY24-$57,000-P @ $87
Payouts
Maximum Profit: $177/BTC
Why are we taking this trade?
Upon analyzing BTC’s 4-hour price chart, it becomes apparent that BTC is encountering resistance around the overhead flip zone. BTC prices managed to touch the distal line of the flip zone, and then faced some resistance, preventing upward movement in BTC prices. On the other side, there’s a demand zone around $59,700, which has proven effective in driving prices higher and altering BTC’s trend on shorter time frames, breaking through the resistance pivot of $60,700.
From a technical point of view, this suggests that BTC’s price may remain confined within a narrow range for the time being. Additionally, the flow of US BTC ETFs has been minimal over the past two days.
I anticipate BTC to continue trading sideways, given our current position between a demand zone and a supply zone, as depicted in the attached BTC price chart. Consequently, traders might consider employing a Short Strangle strategy to navigate the choppy price action.
To implement this strategy, traders can sell a higher strike call option (e.g., $65,000) and simultaneously sell puts in the same quantity of a lower strike price (e.g., $57,000).
If the Bitcoin price is greater than $57,000 and less then $65,000 when the options expire on May 11th, traders will achieve maximum profit from this strategy.
It’s important to note that a large price move in either direction could cause significant losses due to being short both a call and a put.
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.
