Constantinople Speculative Trade Thesis

#Ethereum #RiskManagement #DigitalAssets #Derivitives

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Let’s discuss this upcoming Ethereum Fork on January 16th: Constantinople. This forking event could be a major catalyst for volatility in the ETH market. In these types of structural events there is always uncertainty that could cause tumultuous price action. This can create potential opportunities for profit through a speculative trade via options. Additionally, there is an increased need for RISK MANAGEMENT for those who hold ETH in their corporate treasuries.

In yesterday’s BitOoda Morning Report (1/3/2019) we gave our thoughts on purchasing a Fence (aka a Risk Reversal) to properly deploy defensive RISK MANAGEMENT measures. Today, we want to talk about a speculative structure that can magnify PNL to traders who are ACTIVE scalpers in crypto markets. We are of the opinion that volatility (really GAMMA) in the January (expiring 1/25/2019) is undervalued with this POTENTIAL catalyst event in the near future.

1) Without taking a directional view, buying Straddles is the most efficient way to get long GAMMA and could give you the opportunity to scalp potentially choppy market conditions. Potential Exit Strategies are to:

  • Not having a constructive delta view, one should GAMMA hedge the options position, and with that, timing is key. If you can capture a GAMMA scalp BEFORE the fork date due to a price move from ANTICIPATION, and then capture a second GAMMA Scalp AFTER fork date from the REACTION, you could lock in some profits:
  • At this point you can sell-to-close the Long Straddle and get back any remaining premium from the options structure
  • Or ride out the options to expiration and seek a settlement as far away from the strike as possible.

2) If you have a BULLISH view on the direction of ETH after this catalyst, we think that the recommendation should be to buy ATM Calls. Potential Exit Strategies are to:

  • Simply sell-to-close the Calls you are long
  • GAMMA Hedge with ETH and lean your delta in the direction you are biased in that moment
  • Sell the new ATM Calls (ie. If you purchase the $150 Calls and we rally $20’s, then you would sell the $170 Calls, legging into this Call Spread for free or even potentially a credit).

3) If you have a BEARISH view on the direction of ETH after this event, we think that the recommendation should be to buy ATM Puts. Potential Exit Strategies are to:

  • Simply sell-to-close the Puts you are long
  • GAMMA Hedge with ETH and lean your delta in the direction you are biased in that moment
  • Sell the new ATM Puts (ie. If you purchase the $150 Puts and we sell-off $20’s, then you would sell the $130 Puts, legging into this Put Spread for free or even potentially a credit).

When we broker these options, we think that the trade should be executed bilaterally under an ISDA Agreement. All of our brokers here at BitOoda have their Series 3 License, and we submit these trades into ICE Trade Vault to act in compliance with NFA rules and regulations. If you have interest in executing one of these strategies, contact us IMMEDIATELY!!!

Contacts

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Tim Kelly
Founder and CEO

tkelly@bitooda.io

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Brian Donovan
Executive VP of Institutional Sales
bdonovan@bitooda.io

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Dr. Ilya Kurland
Chief Derivatives Strategist
ilya@bitooda.io

About BitOoda

BitOoda is a digital asset advisory firm specializing in trade execution, market analysis, and structured products.

For business inquiries, please e-mail info@bitooda.io

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Any information (“Information”) provided by BitOoda Holdings, LLC, BitOoda Digital, LLC or Ooda Commodities, LLC and its affiliated or related companies (collectively, “BitOoda”), either in this publication or document, in any other communication, or on or through http://www.bitooda.com/, including any information regarding proposed transactions or trading strategies, is for informational purposes only and is provided without charge. BitOoda is not and does not act as a fiduciary or adviser, or in any similar capacity, in providing the Information, and the Information may not be relied upon as investment, financial, legal, tax, regulatory, or any other type of advice. The Information is being distributed as part of BitOoda’s sales and marketing efforts as an introducing broker and is incidental to its business as such. BitOoda seeks to earn execution fees when its clients execute transactions using its brokerage services. BitOoda makes no representations or warranties (express or implied) regarding, nor shall it have any responsibility or liability for the accuracy, adequacy, timeliness or completeness of, the Information, and no representation is made or is to be implied that the Information will remain unchanged. BitOoda undertakes no duty to amend, correct, update, or otherwise supplement the Information.

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Please make sure to read through the following CFTC and NFA releases:<br> <br> NFA Investor Advisory — Futures on Virtual Currencies Including Bitcoin

https://www.investmentbank.barclays.com/content/dam/barclaysmicrosites/ibpublic/documents/investment-bank/adscmd/----------------------------/NFA%20Investor%20Advisory%20-%20Futures%20on%20Virtual%20Currencies.pdf

Customer Advisory: Understand the Risks of Virtual Currency Trading

https://www.cftc.gov/sites/default/files/idc/groups/public/@customerprotection/documents/file/customeradvisory_urvct121517.pdf

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