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Using a Put Butterfly to Target a Bitcoin Move Toward a Strike

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Summary

The document outlines a bearish, limited-risk BTC options position built from three put strikes. It buys one put at the higher strike, sells two puts at the middle strike, and buys one put at the lower strike. The example targets BTC near the middle strike at expiry, where the spread reaches its stated maximum profit; if the market rises, the stated maximum loss is the initial debit.

The rationale is a technical market view: BTC is described as meeting resistance near a supply zone, with a lower demand zone breached and a possible move toward a pivot level. The sample legs use August 18, 2024 options at $57,000, $56,000, and $55,000, with a quoted debit of $74 per BTC and maximum profit of $926 per BTC. These figures belong to the specific trade example and depend on its quoted prices and expiry outcome. The article offers no backtest or probability estimate, and its chart-based directional thesis can be wrong; the stated payoff is not a general forecast.

Key ideas

  • A put butterfly combines a long higher-strike put, two short middle-strike puts, and a long lower-strike put.
  • The example is designed to reach its maximum payoff if BTC expires at the middle strike.
  • The example limits the stated loss to the net premium paid for the position.
  • The trade thesis relies on resistance, a breached demand area, and a possible move toward a lower price pivot.
  • The payoff figures apply to the quoted option legs and do not establish the likelihood of the target being reached.

Tags

CryptoOptionsVolatilityTechnical indicatorsRisk management

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