It’s been a week of many ups and downs in the market, as information about the cryptocurrency ETF was leaked more than twice, contradicting itself. We’ve observed how even the SEC seems like a clown by posting and then deleting tweets, only to later criticize Elon Musk for his odd actions. Remember to follow us on Tokencimiento to stay updated with cryptocurrency flows:

In the options market, weeks like this are characterized by famous volatility, and we’re not talking about historical volatility, but implied volatility. That is, the volatility that arises from the price of options related to the product. It is clear that to date, the volatility of the nearest BTC maturities has reached almost 100%, a number not seen for a long time in this cryptocurrency.

And what happened? Nothing. The news breaks and everything changes drastically; implied volatility decreases and we return to numbers of more distant maturities. But here I want to show you the effects of volatility and the importance of understanding it.

Let’s see, imagine that it’s January 10 and before a major news event, you decide that BTC could reach 50K. It’s currently trading at 46,250, but you think it can reach 50K.

You decide to buy a call option for January 19 with a strike price of 50,000 USD. The cost of this option is, on average, about 800 USD per contract.

The news comes out and BTC barely moves; even today, January 11, it’s a bit above the price at which you bought. However, your call options are now worth 30% less, about 500 USD.

This means that, although the price of BTC has not changed significantly, neither up nor down, you have lost about 30% of your investment.

How can this be? It’s simple: the volatility of this option has drastically reduced. You can see it in the graph above, where the volatility went from almost 100 to 60.

This is the effect of volatility. If you operate with options, it is essential to understand this concept, as it will be the most important factor in determining whether you will win or lose.

Remember, options are different and require a different approach, always asking yourself first: ‘How is the volatility before buying?’

Skew: Which part of the market is expensive or cheap, or where are traders buying more?

We have clearly observed that in BTC, we have moved from having ‘expensive’ call options to expensive put options. This means that, in the face of certain news, people have been buying, which has caused volatility to rise. Always remember: ‘Buy with the rumor and sell with the news.’

It is clear that since January 9, there are quite a few buyers of put options, as a hedge. That is, it seems that the market no longer has much more room to rise, or rather, investors think it is necessary to protect the gains obtained.

The options market is largely a hedging market. Buying put options, which benefit if the market goes down, is not always a speculative bet. These can be used for hedging, not just for speculation.

The options market is largely a hedging market. Buying put options, which benefit if the market goes down, is not always a speculative bet. These can be used for hedging, not just for speculation.

Fuente : amberdata

Where are they now?

It’s clearly seen that the important area is the 45K zone of BTC, this zone is like a wall of hedges, we shouldn’t lose it, we see that the 47K to 50K zone is full of negative gamma. Aka, if we reach the zone, it resists, but if we surpass it, it can run up to 52K, but we have to see every day how these numbers change.

We have to wait for the volatility to go down and then we can see the new positioning. The market has now been positioning for the news.

Fuente : amberdata

Regarding distant expirations, we see that in the 50K zone, people are evenly matched. Many buyers and sellers. Indecision. We have to wait for next week, the market clears all the bets and hedges that were waiting for the news, and we will be able to see more clearly how it positions itself and go with the flow. That’s what we like. Bets, no thanks, follow the flow and the positioning of those we know best.

Position of the Big Players

Una cosa interesante que vemos, el mercado por ahora, no apuestas por subidas muy fuerte, o al menos no se ven en el mercado de opciones(Skew Open Interest Por encima de los 50-60K). La forms de los graficos aqui puestos seria bien distigto si los grades se posicionan a alza. Por supuesto os visare si lo veo. No digo que no puede subir, lo que digo, que explosio por ahora no se ve. Puede cambiar en dias si, pero lo miraremo.

An interesting thing we see, the market for now, does not bet on very strong rises, or at least they are not seen in the options market (Skew Open Interest Above 50-60K). The form of the graphs here would be quite different if the big players positioned themselves to rise. Of course, I will let you know if I see it. I’m not saying it can’t go up, what I’m saying is that an explosion is not seen for now. It can change in days, yes, but

Fuente : amberdata

Our idea for volatility

Before Christmas, we decided to take advantage of all the existing volatility with a simple strategy: Covered Call. Making covered calls with high volatility is the best thing in the world; you earn much more and it is more efficient. Since the beginning of December, we have been introducing positions and, in the end, they have turned out well. (It should be noted that this is not a recommendation; past results do not indicate future results). The only thing we know is that if there is volatility, we have to take advantage of it.

In this graph, you can clearly see the difference: if it is positive (the implied volatility is higher than the historical one), you have to take advantage of it.

Fuente : amberdata

Position we mentioned in the previous newsletter

We have closed all the previous calls and have issued new ones.

Fuente : Coincall

And this is what we closed yesterday with the issuance of the new call: although the market moved in a different direction than expected, we have managed to make a profit.

Fuente : Coincall

This last call became ‘in the money’, but we managed to sell more than one call against this operation. Now that it has come to an end, we have closed the position.

Remember, now is the time to wait, to observe what happens in the market and then decide the right time to act. Not actively participating in the market is also a valid strategy.

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