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Rising Bull and Raging Bear in BitcoinNewton is known to have said that "The motion of heavenly bodies can be computed, but not the madness of people". That aptly fits the times we live in. Bitcoin (“BTC”) prices have rallied 40% since the start of the year despite bleak economic outlook. A short squeeze in the flagship crypto asset where $850M in short positions was liquidated in just three days is cited as the primary reason for the rally. After the US Fed, ECB, and BoE rate announcements last week, where does BTC go from here? There are ample reasons to remain bearish as much as there is to turn bullish. Are we witnessing a dead cat bounce? Or is this the dawn of a new era where rates flatten or start to soften paving the path to a bull run? Amid the chaos, one thing remains clear. Low volatility. Both realized and implied volatility for BTC remains low. In a market that could either crumble or rally, this case study argues that a long strangle position in BTC options provides a compelling >2x reward to risk ratio. A long options position gains not only from a substantial price move but also from expanding volatility. THE UNCERTAIN ROAD AHEAD FOR BTC Outlook for BTC prices looks uncertain. Bullish tailwinds and bearish restrainers are concurrently at play. 1. Mixed Technical Signals BTC is approaching its 200-day moving average which has served as strong resistance in 2022. During the previous bear market rally, prices failed to breach past $25,000 per BTC, indicating strong resistance at this level. Current RSI at 79 points to BTC being overbought with a risk of downward price correction. However, the 20-day moving average inching towards the 200-day moving average might create the settings for a price rally. Also, the 10-day MA has crossed over the 200-day MA, forming a golden crossover which might be a harbinger of rally ahead. Using this same chart, we highlighted before that BTC prices are now just below the long-term MA (200-week MA) that has proven to be a strong indication for a long-term trend. The divergence from this trend over the past half-year might have been aberrations caused by multiple black swan events. 2. Price volatility related to GBTC lawsuit outcome Also as mentioned previously , Grayscale’s lawsuit against the SEC is an event to watch. Hearing date has been set for March 7th. If unsuccessful, Grayscale has announced plans to liquidate a portion of the trust to bring the GBTC shares back up to NAV of its holdings. This would involve heavy BTC selling pressure. GBTC has $14.5B in AUM with GBTC shares trading at a 41% discount. If GBTC succeeds, BTC prices could rally in sign of favorable regulatory acceptance. However, ETF’s creation/redemption mechanism would allow GBTC to rebalance their holdings resulting in spot BTC sales to arbitrage the discount. 3. Long term holders showing resilience and not selling Recent price rally has restrained long term holders from dumping their holdings. Growing number of long-term holders indicates conviction and that combined with climbing retail participation sets the tone for a bull run. 4. Hash Rate Rebound in 2023 BTC mining is profitable again. Rebounding hash rates, stable energy costs, and elevated BTC prices is a relief to the miners. Miner reserves are at a yearly low removing the risk of miners dumping their inventory. Miner sales are now limited to BTC mined daily. 5. Growing Open Interest but mixed directional positioning Asset managers have increased their net long positions by 53% between December 27th and January 24th. Meanwhile, leveraged funds continue to remain net short during this period. Clearly institutional investors remain puzzled on BTC price outlook. In a sign of growing investor attention, overall OI is up 8.4% over the last month and nearly 20% over the last quarter TRADE SET UP With adequate arguments both in favor of and against BTC prices, establishing a directional position is difficult. BTC carries a reputation for triple-digit volatility over its 14 years trading history. Intriguingly, BTC volatility has been soft in the recent past. Low volatility allows investors to acquire options at reduced costs. Being price agnostic, this study makes a case for a delta-neutral long strangle to secure a 2.27 reward to risk ratio. A long strangle combines of two trades. One, an out-of-the-money long put (at a strike below the current bitcoin price) to gain from a falling market. Two, an out-of-the-money long call (at a strike above the current bitcoin price) to gain from a rising market. A strangle allows the holder to extract an outsized gain (profit) for every unit of pain (costs incurred for premiums). This asymmetric pay-off in an options portfolio is referred to as convexity in finance. It enables holders to extract higher rewards for each unit of risk. Leg 1: Long Put options on BTCK3 (options on futures expiring in May 2023) with a strike price of $21,000 at a premium of $1,635. Leg 2: Long Call options on BTCK3 (options on futures expiring in May 2023) with a strike price of $29,000 at a premium of $1,105. Entry: $2,740 Break-even points: When CME-BTC-Futures touches $30,740 or $18,260. Target: BTC at either $33,600 or $13,700 Profit at Target: $1,860 (if BTC rises to $33,600) or $ 4,560 (if BTC drops to $13,700) Stop-loss level: At 30% of the drop in options premium. Loss at Stop-loss: $820 This strategy will start generating returns when the underling future trades past break-even points. It will also generate returns as volatillity expands fueling increase in strangle value. MARKET DATA CME Real-time Market Data helps identify trading set-ups and express market views better. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com DISCLAIMER Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services. This material has been published for general education and circulation only. It does not offer or solicit to buy or sell and does not address specific investment or risk management objectives, financial situation, or needs of any person. Advice should be sought from a financial advisor regarding the suitability of any investment or risk management product before investing or adopting any investment or hedging strategies. Past performance is not indicative of future performance. All examples used in this workshop are hypothetical and are used for explanation purposes only. Contents in this material is not investment advice and/or may or may not be the results of actual market experience. Mint Finance does not endorse or shall not be liable for the content of information provided by third parties. Use of and/or reliance on such information is entirely at the reader’s own risk. These materials are not intended for distribution to, or for use by or to be acted on by any person or entity located in any jurisdiction where such distribution, use or action would be contrary to applicable laws or regulations or would subject Mint Finance to any registration or licensing requirement.
CME:BTC1!
by mintdotfinance
9
$MCHP Technical Analysis: Stock at Yearly and Monthly HighsYearly High Stock price is at yearly highs. Monthly High Stock price is at monthly highs. Above Bollinger Band Price is above the upper 14 day bollinger band. This is mostly a reversal signals as price has overextended and might come down. Pivot Machine Gun (PMG) When price makes continued highs for 5 days. This is a bearish reversal signal only if price starts to break the low of the last day's candle. Pocket Pivot The volume on the green candle today was higher than the volume on any red candles over the last few weeks. This can signify institutional accumulation. Parabolic Rise The stock has stayed above the upper bollinger band for 3 straight days. Stochastics Overbought Stochastics value is above 80.
NASDAQ:MCHPLong
by ImmaculateTony
$ON Technical Analysis: Yearly High Close, Trendline ResistanceYearly High Close Price is close to the yearly highs. Trendline Resistance Daily price is touching a trendline resistance level. Price can hit the resistance level and start going down, which would be a bearish signal. It can also break out of it to form a breakout, which would be bullish. Pivot Machine Gun (PMG) When price makes continued highs for 5 days. This is a bearish reversal signal only if price starts to break the low of the last day's candle. Pocket Pivot The volume on the green candle today was higher than the volume on any red candles over the last few weeks. This can signify institutional accumulation. Stochastics Overbought Stochastics value is above 80. Wedge Descending wedge. These are calculated base on last 3 monthly candles. Therefore, they are best visible on the monthly and weekly chart. $ON 3/17 Bullish
NASDAQ:ONLong
by ImmaculateTony
NEGG Hedged Options PlayHome and office electronics e-tailer Newegg Commerce sells computers, parts, accessories, home video/audio, phones, wearables, digital cameras, gaming consoles and titles, smart home entertainment products, office supplies, software, digital downloads, auto, motorcycle, marine and aviation electronics, parts, tools and equipment, home improvement tools and appliances, fitness, sports, and health products. NEGG has become a bit of a meme stock, reaching ATH of $75+ in July of 2021, but has since corrected back down to ~$1-2. With the possibility of NEGG hitting the level of the previous bottoms of this double bottom pattern (~$2.60) or falling to that previous low of 1.16, here's a fixed income strategy that captures the growth potential while also cushioning from a large drop. We can make a fixed 36% (37% annualized) as long as the stock price does not fall below $1.45. Further downside protection: only start to lose any of the investment if NEGG falls more than 44% to below $1.11 through expiration. Sell 3 $1.5 puts, exp 1/19/24 Capital Requirement: $332
NASDAQ:NEGGLong
by oliveinvest
JWN Protective Options StrategyFashion retailer Nordstrom sells brand name clothing, shoes, beauty, home goods, etc in 94 large department stores as well as 240 Nordstrom Rack outlets. It also makes ~50% sales online, via their official websites as well as flash-sales from HauteLook and curator services through Trunk Club. Technically minded investors may see some opportunity in the chart (bottoming, consolidation into a falling wedge) along with optimism in the general stock market with the Fed's lower rate hike this week. The RSI has also been consistently chopping in the almost-oversold region, possibly indicating upward momentum. However, Nordstrom's weak holiday sales earnings may also cause some hesitation -- this opportunity is not without risks. With this bullish options strategy, you can capture up to 21% (22% annualized) of the potential gain with downside protection of 34% -- start to lose only if JWN falls below $12.43 as of 1/19/24 Trade Legs: Buy 1 $17.5 call Sell 1 $22.5 call Sell 2 $12.5 puts All expiring 1/19/24 Capital requirement for this strategy: $2,486
NYSE:JWNLong
by oliveinvest
$QQQ Predictions through Feb 1/23We have been building in strength and have reacted positively to earnings thus far. Along with positive market news the push is continuing to trend upward. However we are approaching the 1 Year Resistance point at 295. This chart shows 3 possible options ending the month of January and going into Feb 1. My potential entry points for each trade depend on the Pre Market movement on 1/27. Bullish - Goal: 300 Entry: (Pre Market) Above 294.37 on 1/27 OR (Pre Market) Above 294.01 on 1/30 If you are bullish and believe we can break the 1 year resistance line we could potentially see a boost up to 300. We have to break the resistance with enough momentum to see this happening. Also continued positive earnings/interest rate news. Neutral - Goal: 292-295 The volatility caused by earnings would be a major factor in this target. This assumes we gap up/down based on earnings reports and then reverse a little throughout the trading days. Bearish - Goal 285 Entry: (Pre Market) Below 291.39 on 1/27 OR (Pre Market) Below 290 on 1/30 Due to the high RSI and high resistance from our 1 year resistance line we could see a strong downward move. I have this breaking out of the 30 day trend channel. If we start downtrending I believe we have a selloff. Depending on the Jan. 31-Feb. 1 policy meeting regarding the rate increases.
NASDAQ:QQQShort
by thesandage
TSLA - MyMI Option PlaysHey guys, just getting back to the desk for the first full day today so sorry for not sharing our current option plays on Tesla. I believe our last update was riding PUTs back in the $122-$123s which we closed those trades going throughout the end of the week on Thursday. Didn't make any major plays going into Friday, and waited to see how this week's session went for TSLA. On Monday, we bought some ITM Calls around the $135-$136 Price Levels and rode that into today as we found resistance around the $144-$145 Price Levels which actually match up to our Fib Retracement as shown. We're looking for a 34-EMA Rejection which would potentially send TSLA to first retest those $137.19 > $129 > $122-$123 Levels of Support that have converted from previous resistance. If TSLA can get above $145 and find support there, then we will be looking PUTs naturally bu we also have Earnings going into tomorrow, so may have some fun with that with an additional option side play to ride into the night. We will be playing PUTs going into
NASDAQ:TSLA
by MyMIWallet
LMT - MyMI Option PlayLockheed Martin not only landed on a fundamental price level today (The price that it was at before Covid March 2020 Market Crash), but it also acquire roughly a $1B in Volume total, 2nd to JNJ. We like it for the continue concerned across seas that seem to be gaining more and more tension. Whether it's Ukraine/Russia or the worries in Asia, we will be looking to place some CALLs (ITM) to hold at least back to $458 to confirm that a Support to Resistance Conversion is not being completed. If so, Lockheed could potentially lose support at the $440 Levels and move back down below the 410-420 Price Levels Regardless, we will be playing options to create a new positioning moving forward.
NYSE:LMTLong
by MyMIWallet
AMRS Options Strategy with downside protectionMultinational biotech company Amyris manufactures and sells synthetic ingredients to the clean beauty, personal care, health and wellness, flavor and fragrance, nutrition, food and beverage markets in Europe, North America, South America, and Asia. It also offers products under the Biossance, Purecane, Costa Brazil, OLIKA, and JVN brand names. Amyris also collaborated with the Infectious Disease Research Institute to develop a COVID-19 vaccine using their synthetic squalene, otherwise found naturally in sharks. As global demand increases beyond natural supplies, the company believes that synthetic ingredients are the sustainable way to go. TA-minded traders might also see some pretty bullish patterns forming (falling wedge, double bottom, even Elliot Wave on the shorter timeframes). However, with Microsoft earnings leading a drop in the stock market today, how can investors balance fear and fear of missing out? Here's a hedged #options strategy that makes a fixed 10% yield (26% annualized yield) unless $AMRS falls more than 69% to below $0.50. More downside protection: Start to lose only if AMRS falls by more than 71% to below $0.46 as of 6/16/23. Sell 5 $0.50 puts Expiring 6/16/23 Capital required: $229
ALong
by oliveinvest
PANW - MyMI Option PlaysWe purchased CALLS for PANW going into yesterday's morning session around the $144 Price Levels as we noticed that PANW broke out of it's Longer-Term Downward Channel. After further analysis, we acknowledge the potential for $165-$168 while showing the potential momentum of breaking through the Expected Resistance around the $152-$153. We expect to hold this as long as the stock continues to hold the current Blue Trend and for risk management, we would close out our trade and take those profits to purchase our long-term hold in the stock as it is still 28% off of it's $213.63 ATH and some headroom to move forward to the upside. Will keep you guys updated and thanks for following us at MyMI!
NASDAQ:PANWLong
by MyMIWallet