Good Morning. Well jump right into it. We are still on this tremendous tear, and it feels like BTC wants nothing more than to get back to $10,000. We do not wish to fight this force. The old adage “the trend is your friend” tells us to ride the wave for however long you can before getting off safely.
With our deep-rooted options backgrounds, we really look into the options market for opportunities to make returns on leveraged products with suitable risk parameters. On Wednesday last week, we wrote, “We have remained rangebound, and volumes have dropped by about one third since the breakout higher almost a month ago. At this moment we are in a ‘range contraction’ and testing the near-term support ($7,000) and resistance ($9,000) to see which of these will break first. We still hold our price target to the upside as being $13,000.” Since Wednesday, volumes have roughly doubled, and we have broken north of that near-term $9,000 resistance.
In terms of implied volatility, we had a jump from the low 70%’s, to about 78–80%. The new highs warrant this jump in implied vol. We also have seen some more positive call skew come into the BTC options market. As we stated in our piece last Wednesday, “If you are a long vol trader and want to accumulate, doing so in the low 60’s would be ideal, looking to sell options anytime we spike to or above 100%.”
All signs point higher…
We are working some LEO options this morning:
LEO Z (12/27/19) 4.00 calls .10/.72
LEO Z (12/27/19) 5.00 calls .05/.62