Cryptocurrencies have rallied since the beginning of this year, with Bitcoin BTC/USD registering a 39.48% return. However, Bitcoin bears appear to have bet the apex coin will not surpass the $24,000 mark by Friday. And so far, this has paid off.
What Happened: Options data for Friday’s expiry shows the maximum open interest on the call side lies at $24,000, indicating smart money — also known as professional traders’ bets — seems to be betting this as the short-term resistance.
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The Strategy: The “Bear Call Spread” is a bearish strategy where a trader will earn a net credit on shorting or writing a lower-level call option while simultaneously buying a higher leg call. This higher leg call purchase acts as a hedge in the event of a sudden rise in the asset price while reducing the margin money one has to park for shorting the initial leg.
Options data from Delta Exchange shows that the $24,000-mark Bitcoin call expiring on Friday was trading close to $430 on Jan. 21 when the apex coin had reached a near-term peak of about $23,278. Professional traders appear to have shorted the $24,000 call at levels close to the $430 mark on the higher end. Those who might have taken the Bear Call Spread with the $24,500 call, would have bought the latter call at levels close to $308. This gives a spread of $122.
Profit: Bitcoin has traded relatively flat since last week and has not crossed the $24,000 mark. Based on the current trending options prices, the spread between these calls currently stands at just $37. That means Bitcoin bears who went for the Bear Call Spread are already sitting on gains of $85. One noteworthy thing about Bitcoin options is the bid/ask spread is wide, and it may not necessarily be possible to obtain the best prices unless one uses a pricing formula and waits for the correct levels and volumes to deploy the trade.
Since present open interest levels also show that bears continue to maintain their open positions at the $24,000 level, it seems unlikely that the asset will surpass this mark on the upside in the short term. If Bitcoin continues to trade below $24,000 by Friday, then bears who had deployed the aforesaid strategy at the peak levels seen last week, will keep the entire $122 spread.
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