BitOoda Afternoon Report 1/20/2021 — Volatility

  • All options are historically expensive. Given that a large correction already happened, January may be at the largest risk of Vega and time decay losses. We are still far away from longer term support lines (almost $12000). Our opinion remains short at your own risk, and only if you have a game plan and an exit strategy. If you must buy options for Gamma, 0.16–0.25 Delta puts offer the best value.
  • The market is bullish until an uptrend is broken. If you want to be long, identify your trailing stop loss levels. A rise this steep is prone to sudden reversals/corrections.
  • Roll contango trades to the best return parts of the curve.
  • We prefer to lean short Gamma/Vega for the next week. We think of it as a tactical short. As soon as the market exits the triangular formation, we would want to be long Gamma. Vega will probably perform on a bullish breakout and may underwhelm in a selloff. Therefore, we will look to purchase February strangles in a week or upon breakout. If the breakout happens before January expiry, you may have to lift the hard offer. Otherwise, patience should be rewarded.
  • The market is bullish until an uptrend is broken. If you want to be long, identify your trailing stop loss levels. A rise this steep is prone to sudden reversals/corrections.
  • Reduce contango trades in to have room to add if spreads widen.

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BitOoda

BitOoda

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A boutique digital asset investment bank focused on providing innovative and compliant capital markets solutions for institutional clients.