Mastering Bitcoin Volatility: The Call Butterfly Strategy

View on market

If your view is Bullish on BTC here is a trade idea that will work in the current market scenario.

Call Butterfly

The proposed strategy is a Call Butterfly Strategy. A Butterfly spread with calls is a three-part strategy that is created by buying one call at a lower strike price, selling two calls with a higher strike price and buying one call with an even higher strike price.

You may take this trade if you think BTC has upside potential on a short term basis.

Trade Structure

(OTM Call) Buy 1x BTC-29MAR24-77,000-C @ $270(OTM Call) Sell 2x BTC-29MAR24-80,000-C @ $120(OTM Call) Buy 1x BTC-29MAR24-85,000-C @ $30

Payouts

Maximum Profit: $2940/BTCNet Debit of Strategy: $60/BTCRisk/Reward Ratio: 1:49

Why are we taking this trade?

Bitcoin has surged past the triangle pattern barrier at approximately $68,000, breaking resistance levels in the 4-hour timeframe which suggests a bullish stance in the short term. Traders anticipating this bullish movement over the next couple of days may consider employing a call butterfly strategy for short term gains.To implement this strategy, traders can buy a higher strike call option (e.g., $77,000) and simultaneously sell calls in double quantity (2x) with a higher strike price (e.g., $80,00) and buy call with an even higher strike price (e.g., $85,000)

If Bitcoin touches $80,000 until the expiry date (March 29), traders will be at maximum profit from the strategy.

Should there be a market downturn, the downside risk is confined to the initial debit of $60. It’s worth noting substantial open interest at the $80,000 mark, indicating a potential resistance level that could amplify profits around this threshold.

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.