Navigating the Sideways Market with a Short Strangle Strategy

View on market

Bitcoin’s price is trading sideways between $66,500 (support) and $69,500 (resistance) with low spot BTC ETF flows. A Short Strangle strategy may help traders manage the anticipated choppy market.

Short Strangle

The proposed strategy is a Short Strangle. A Short Strangle consists of one short Call with a higher strike price and one short Put with a lower strike. Both options have the same underlying and the same expiration date, but they have different strike prices.

You may take this trade if you think BTC will play in the range of $70,000 and $65,500.

Trade Structure

(OTM Call) Sell 1x BTC-2JUN24-$70,000-C @ $148
(OTM Put) Sell 1x BTC-2JUN24-$65,500-P @ $135

Payouts

Maximum Profit: $283/BTC

Why are we taking this trade?

I expect Bitcoin to continue trading sideways, with its price stuck between support and resistance levels, as shown in the attached 4-hour price chart. We can see resistance around $69,500 on the upside and support around $66,500 on the downside.

In the short term, the market structure appears to hinder any sharp movements in Bitcoin. Additionally, spot BTC ETF flows have been very low throughout the week.

Given this situation, traders might find a Short Strangle strategy beneficial for managing the anticipated choppy price action.

To implement this strategy, traders can sell a higher strike Call option (e.g., $70,000) and simultaneously sell Puts in the same quantity at a lower strike price (e.g., $65,500).

If the Bitcoin price is greater than $65,500 and less then $70,000 when the options expire on June 2nd, traders will achieve maximum profit from this strategy.

It’s important to note that a large price move in either direction could cause significant losses due to being short both a Call and a Put.

How to take this trade on Deribit?

Step 1: Go to Combo books under the Strategy tab & Create combo.

Step 2: Click RFQ and send your order to the Combo List.

Step 3: Go to Combo list (BTC), click on your Strategy and execute.

Disclaimer

This report must not be used as a singular basis of any trading decision. The document includes analysis and views of our research team. The document is purely for information purposes and does not constitute trading recommendation/advice or an offer or solicitation of an offer to buy/sell any contract.

AUTHOR(S)

RECENT ARTICLES