Hedging Opportunities

Last Wednesday, our BitOoda Morning Report outlined the changes we saw in the BTC options curve, pointing out the steepened call skew, weakened put skew, and overall rise in implied volatility.

As we have seen the price of BTC settle down into a range between $4,800-$5,300 over the last week or so, we use today’s morning piece to dive into one of our trade recommendations from that report. We proposed to hedgers, that buying puts, “especially low delta puts as they are cheap relative to the close to “At-The-Money” ones (June $3,500 and below appears to be the best value on the board).” As we stand by this recommendation, we also see value for hedgers in executing a Fence, aka risk reversal, aka collar. Buying these cheap puts are great, however outlaying premium for some may not be a preferred strategy. By entering the Fence, you will sell upside calls to finance the purchase of these puts. Depending on which strikes and tenors you choose, you can potential ‘get paid’ to put on this structure i.e. the calls will be worth more than the puts. This strategy is made possible due to the changes in the BTC Options curve, as we noted last week.

As price is roughly trading $5,200, here are some structures that we see as potentially opportunities for hedgers to lock in price floors and cap their ceilings on their inventory for flat or even collecting some premium:

BTC M (6.28.19) $4,000/$7,000 Fence
BTC M (6.28.19) $3,500/$8,000 Fence
BTC U (9.27.19) $4,000/$7,000 Fence
BTC U (9.27.19) $3,500/$8,500 Fence

Above, you can see BitOoda’s BTC Options model showing our values and deltas of BTC options for April, June and September. If you would like to talk through some potential hedges for your firms inventory, future mining rewards or crypto generated revenue, as always, please connect with us and we can put together the right structures to fit your needs.

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