For 3 three weeks now, we have been bouncing back and forth between the 9,000 and 10,000 level. It looks like the market is looking for a catalyst to either break higher or lower.
For those who see calm ahead in the next weeks and want to bet that we will stay in that range for longer, we suggest putting on an Iron condor spread. The 31Jul2020 8,000/9,000/10,000/11,000 Iron condor seems to be the most appropriate. $600 of premium can be collected now, with a maximum net loss of $400.
If Bitcoin price at expiry is between 9,000 and 10,000 the investor pockets the premium. The break-even points are at 8,400 on the downside and 10,600 on the upside. So, the investment remains protected as long as BTC stays between 8,400 and 10,600.
We picked those strikes for a reason. We see 8,600 and 10,500 as being the 2 strongest support and resistance levels that the market failed to break numerous times. We see as well a high concentration of orders on the 8,500, 10,000 and 10,500 level.
The risk of this position is, of course, if we break those supports/resistance. This strategy is also short vega. In 2/3 weeks if we are still in that range, vol will have probably further declined and we would suggest taking partial profit
For those who see turbulence ahead and fear that we are going to exit abruptly, we suggest putting on a 8,500/10,500 26Jun2020 strangle, to take advantage of the same level of support/resistance.
The strangle is currently worth $185 and could be easily rolled into July if nothing happens. This strategy would be profitable if BTC moves over the next 10 days, above 10,685 or below 8,315. This strategy is long vega.
Sources:
Tradingview.com
Tradinglite.com
Deribit.com
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