We’re approaching the end of 2023, and we’ve set records for BTC transactions. The options market also broke records; 2024 will be very interesting, the year of Crypto OPTIONS. You can’t miss it. Remember, in options, everything is non-linear, meaning you can risk one unit and have unlimited profit. This is asymmetry. Plus, you can win if the market goes up, down, or stays the same. Traditional markets are losing all their appeal; volatility, the VIX, is at lows, and opportunities are dwindling. I repeat, but I truly believe 2024 will be the mega year where crypto options take off. It’s a bit more complex, but here we are to help and guide. Follow us at https://t.me/Tokencimiento
Fuente : Glassnode
The month isn’t over yet, but we can clearly see that the options volume might set records, just like transaction volume.
The Implyed Volatility
I always say that volatility is the most important factor when assessing the state of the market.
The red line is in the mid-high range, which is normal given the current market movements, and it warns us: be careful with buying options, as you might be paying an overprice. But more than the volatility itself, we’re interested in knowing whether there is a “Premium” in the market or not.
Clearly, we see that the market is overpaying, that is, the price of options, since there are more buyers than sellers, is more expensive; the market is paying more, bidding more money than usual for options. For a professional trader, seeing these data indicates which strategies to implement. Currently, buying calls or puts is not a good idea, as the Premium (Variance Premium) is positive. All the strategies you implement should have more Negative Gamma. In plain language, this means you should have more options sold than bought. And remember, this doesn’t mean you should sell options without coverage; you can make spreads, like buying a Call and selling another more expensive Call, or, for an added advantage, selling a Call and buying a coverage Call. Remember, in options trading, the variety of strategies is infinite. But you always need to know where the advantage is, as this is what will make you money in the long run.
We’ve looked at the market, identified where the opportunity window is, now let’s see where we’re heading.
The December 2023 expiry
The December expiry is generally very large in the options market; the chart shows that
But we are interested in the flows of these options and how the market makers are positioned.
We notice that the market is with negative gamma, meaning that the put options people bought for protection weigh heavily. This could create an interesting buying flow that many will try to take advantage of, especially as we approach the most important options expiration of the year.
Last week, we mentioned that the market reached an important point, 44K-45K, and that it would most likely retreat to the 40K-41K zone.
And lo and behold, the market has respected this area. The blue line is in the chart below.
Fuente : Coincall
But what has been driving us for the past two days?
On Monday in the Telegram channel, we mentioned that once again, there are many buyers of calls.
This can be clearly seen in the Skew, just like at the beginning of December; here too, they are attacking strongly.
Fuente : amberdata
This way, it’s much clearer: we see in the blue section how calls are more in demand, and therefore more expensive, and this is a sign that everyone is buying them.
Fuente : amberdata
And it’s confirmed, the market has an appetite for calls, that is, the buying options.
Fuente : amberdata
Everyone likes buying options, and it’s complex to explain, but let me tell you that it’s simply because of the December expiry dominated by put options that are expiring and losing a lot of value each day. The market maker creates an upward flow due to this phenomenon, a flow that professionals are aware of and take advantage of. But we see that they’re not just buying calls; they’re also making call spreads.
The first target based on the options and the market maker’s positioning is in the 45K zone for BTC.
Fuente : amberdata
This zone might be challenging to surpass due to the significant interest in it, but if it’s overcome by the end of the year, we could see a 50K. It requires a lot of optimism, but it’s possible.
A strategy we’ve been carrying for weeks is buying Futures Against a Sold Call. We’ve implemented the strategy in ETH, where we preferred the liquidity. It’s a strategy that benefits if the market rises, up to 2300 by January 2024. We’ve already sold a call last week, and this is a new call we hold. As observed, we’ve achieved a very good performance, +347% in weeks.
This is not a recommendation, just educational. Past earnings do not indicate future returns.
Fuente : Coincall
As you can see, we analyze the market in a different way. Of course, we know it’s not the holy grail, but looking at options and their flows helps us take operations with a bit more advantage in the markets. It requires deeper knowledge, but this is the reason for these reports: so you can learn with us.
The year 2024 can be a very interesting one, especially from the perspective of options.
Follow us and learn about options.
Happy New Year to everyone, thank you for reading, and I hope you all have a prosperous year of options and remember to move with the flows.
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Greg
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