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Using a Call Butterfly for a Short-Term BTC Move

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Summary

The document outlines a defined-risk call butterfly on BTC for a trader expecting a modest short-term rise. The example buys one call at a lower strike, sells two calls at the middle strike, and buys one call at a higher strike, all expiring on April 3, 2024. The stated strikes are $72,000, $72,500, and $73,000. The example gives a net debit of $30 per BTC and a maximum profit of $470 per BTC, reached if BTC finishes at the middle strike at expiry.

The rationale cites nearby support on the four-hour chart and BTC’s proximity to its prior all-time high, but supplies no backtest or probability estimates. The loss is limited to the initial debit if the market falls; profits are concentrated around the middle strike and decline if BTC finishes materially above or below it. The payoff depends on expiry price and the quoted option prices, so the example is not evidence that the trade will be profitable in other market conditions.

Key ideas

  • A call butterfly buys a lower-strike call, sells two middle-strike calls, and buys a higher-strike call.
  • The example uses BTC calls expiring April 3, 2024, with strikes at $72,000, $72,500, and $73,000.
  • The stated debit is $30 per BTC, which is also the maximum loss in the example.
  • The stated maximum profit is $470 per BTC if BTC expires at the middle strike of $72,500.
  • The trade suits a bounded bullish view, with profit concentrated near the middle strike and no supporting backtest.

Tags

CryptoOptionsVolatilityRisk management

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.