BTC Options explained - Strangle Setup
Updated
Options can be a great way to manage an underlying position a hell of a lot easier when understanding how to use them against your underlying. When using Options you are building a plan, executing it and playing it out over time rather than a usual swing or scalp position.
Overview:
Historical volatility percentile (HVP) is extremely low on the daily timeframe (tf) which means it will expand, volume will come rushing through again at some point in time. As well as the HVP we are approaching the end of this consolidation, getting 3 touches on the bottom side which indicates a fourth on the lower would have a chance of breaking down, and a test back to the topside would have a chance to break up. Besides some other indicators, just using these 2 we know soon we are looking for price action (PA) to explode and break this consolidation. Who knows when but we have several ways we can play this with options trading.
We can either buy premium on the options board here to try and capture the explosive move. This would mean buying contracts in both directions, and if PA surpasses those strikes during that contract period you begin getting ROI and potentially hitting into green profit. A play usually used when expecting explosive moves.
The other scenario is selling options to capture price with in them strikes. If PA goes past the strikes sold, you begin paying the buyer. This is usually a play used when a explosive move is not expected, but it can be used to the advantage of the seller as long as he or she plans to incorporate holding the underlying asset...BTC in this case. If you hold the underlying asset your asset at a certain point will stop making you profit & instead be covering any loss you have to pay to a buyer on the contract sold once surpassing the strike price. This is called a cover, and can be extremely useful.
This Play:
Now is a time you could definitely argue that you should be buying premium not selling, but I find this play to still capture a range that will unfold over the coming weeks.
This is a short strangle setup on the 31st expiring contracts on the 11,500 Strike to the upside & 7,500 Strike to the downside as i find that to be at the area we can measure the expected outbreak from this consolidation to pullback at some point in time. This allows plenty of time to cover the direction PA goes.
to be continued . . .
Overview:
Historical volatility percentile (HVP) is extremely low on the daily timeframe (tf) which means it will expand, volume will come rushing through again at some point in time. As well as the HVP we are approaching the end of this consolidation, getting 3 touches on the bottom side which indicates a fourth on the lower would have a chance of breaking down, and a test back to the topside would have a chance to break up. Besides some other indicators, just using these 2 we know soon we are looking for price action (PA) to explode and break this consolidation. Who knows when but we have several ways we can play this with options trading.
We can either buy premium on the options board here to try and capture the explosive move. This would mean buying contracts in both directions, and if PA surpasses those strikes during that contract period you begin getting ROI and potentially hitting into green profit. A play usually used when expecting explosive moves.
The other scenario is selling options to capture price with in them strikes. If PA goes past the strikes sold, you begin paying the buyer. This is usually a play used when a explosive move is not expected, but it can be used to the advantage of the seller as long as he or she plans to incorporate holding the underlying asset...BTC in this case. If you hold the underlying asset your asset at a certain point will stop making you profit & instead be covering any loss you have to pay to a buyer on the contract sold once surpassing the strike price. This is called a cover, and can be extremely useful.
This Play:
Now is a time you could definitely argue that you should be buying premium not selling, but I find this play to still capture a range that will unfold over the coming weeks.
This is a short strangle setup on the 31st expiring contracts on the 11,500 Strike to the upside & 7,500 Strike to the downside as i find that to be at the area we can measure the expected outbreak from this consolidation to pullback at some point in time. This allows plenty of time to cover the direction PA goes.
to be continued . . .
Note
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