Bitcoin BTC$111,252.40 We ignored expectations for significant volatility in August and traded within our reach. Market dynamics show a continuous low volatile regime in the short term, so 10x research emphasizes “short strangulation” as an ideal play.
“Given the current dynamics in the Bitcoin options market, a short tension will look right next month. Bitcoin trading is around $113,000 with an expected range of $95,000-$125,000, and will sell nearly $95,000 in money (satisfaction in September), as it sells money out of money (september expiration date), in a report to clients on Thursday.
Short Strangle involves the simultaneous writing (selling) of high strike calls and low strike putts of money that are equally distanced from the spot price of the underlying asset, with the same expiration date.
This strategy is similar to selling insurance against both bullish and bearish moves in exchange for premiums. This represents the maximum profit that can be achieved in this case if the spot price remains between two strike prices ($95,000 and $125,000).
Selling options (or strangle) is a common strategy when implicit volatility (IV) exceeds the volatility achieved.
“Because the implicit volatility curve is trading above the level where it is realized, signaling options are high, so the strategy is working and the market is unlikely to bring about big moves outside of defined ranges in the short term,” Thielen said. “The options indicate that they imply a volatility term structure.
The term structure of implicit volatility (IV) is a graphical representation of how volatility evolves across various future time visions. It is usually tilted upwards, reflecting increased uncertainty and risk as it increases with longer expiration dates.
Risk Reward Profile
BTC must continue trading between $95,000 and $125,000 due to the proposed strategy to generate profits. Trades along range reduce demand for OTM calls and puts, ejecting premiums from these options and generating profits for tense sellers.
Thielen’s previous recommendation from early August was a short stranglehold that included a $105,000 put and a $130,000 call. This strategy produced a yield of 3.5%.
However, it should be noted that short strangles can present serious risks and lead to significant losses, especially when volatility suddenly increases. Therefore, traders need to continuously monitor their location and related market variables to effectively manage risk.
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