Thursday, December 24, 2020

Weekly Bitcoin Put Returns Week #3 - $1,680 Expected Profit

This is week #3 of posting progress of this strategy here in this sub. For some context, I've been bullish on Bitcoin since the March equities crash hence why I'm selling puts. I expect to remain bullish throughout 2021 as 2020 is the halving year for Bitcoin and in historical cycles the supply shock from the reduced amount of Bitcoin causes rapid and parabolic price appreciation in the year after the halving. Combine this with the fact that central banks around the world are printing trillions of dollars we have ourselves a great recipe for success for selling put options on Bitcoin. To add, most US based thetagang members are probably aware of the $900bn stim package which is currently under review as President Trump wants to increase the $600 checks to $2000. Lastly, if you are not in the Bitcoin / crypto community, one more bullish indicator has been institutional investment that has been a landmark achievement in the waiting for many years.

12/25 expected profit - $1680

This week I've focused again on the weekly expiration 12/25 as the daily expiration strikes are too close for comfort in the event of a catastrophic 30% correction which Bitcoin has seen in historic bull runs. While not shown in the screenshot, a lot of Bitcoiners are saying that institutions like Guggenheim, MicroStrategy, Square, etc provide a price floor and also reduce the likelihood of a 30% correction - however I would still sell put options with caution. At the moment, I'm targeting for strikes roughly 20% OTM, which is why most of the weight this week as you can see above was on 17k-19k strike zone with me scaling into smaller position sizes for anything over 19k to capture some juice. You'll also notice some small positions on the dailies like 12/23 which collected $60 in premium yesterday (these daily positions are significantly less as for the reasons I mentioned above).

Understanding this is primarily a put options selling sub, you'll also notice:

(1) I'm long 1.8x 6/25/21 24k calls as well - I've excluded this from my selling P&L

(2) I'm short 14x 12/25/20 32k calls - I've included this in my P&L

Why am I selling calls in a bull market? Last week when Bitcoin punched through 20k with full force, Moonbois were driving the premiums for 32k and 36k calls through the roof. I could not resist selling these despite the momentum as blasting through 20k and skipping straight into the 30k zone was not something I believed was likely as profit taking and some consolidation was expected to happen at all-time-high price levels. Moonboi = Bitcoiners who believe Bitcoin only has one direction, and that is up and to the moon.

BTC Whales are still depositing into exchanges, you can see this here on Chain Analysis. This is one indicator that I have my eyes glued on to detect possible whale dumps. Personally, when inflows to exchanges are greater than 90k - this is a "warning - sell with caution" zone. The reason for this is because whales typically only deposit to exchanges to sell their Bitcoin. If you look at 11/26 inflows (about 150k Bitcoin) and match that to price action on the Bitcoin charts, you will see there was a considerable price correction at those times when this indicator flashed above 100k. Please do not get your account blown up due to a whale dump when this indicator is public blockchain data and free to use.

11/26 inflows - 150k BTC

Bitcoin price action on 11/26

11/26 - 16.59% price correction

That's it for this week, I hope everyone stays healthy and warm as we break off for the holidays. If you have any questions, please consider commenting as I had so many DMs last week which I did not expect and could not respond to. Your question might be someone else's and having it shown for everyone is better than having it private in the DM. Its great to see a lot of Bitcoiners in this sub!


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