Bitcoin Options Beginner — Best Resources and First Trade Idea
Disclaimer: this is not investment advice
I have been trading Bitcoin options in small volumes since November 2018:
and posted my first options trade idea on Twitter below in Decemeber 2019. (I’ll explain this later)
I’m a complete novice but I have managed to do well by simply being long volatility when the conditions are right. My introduction to the whole thing was through BambouClub who is still the best signal to noise in terms of options ideas on Twitter.
His guide is the best starting point. https://hackernoon.com/trading-bitcoin-options-at-deribit-part-1-155e9b7fc5dc It outlines the most popular beginner strategies which involve ‘straddles’ and ‘strangles’.
March 12, 2020, was a sudden, big win for anyone who was ‘long volatility’ that day. Since then it has been a waiting game for ‘Implied volatility’ to drop. Skew is a good resource for tracking this. bitcoin-options
Once you have had a look around both sites. I recommend you go through the Deribit blog series. After that, you should follow @pelioncap and Su Zhu who share more advanced ideas.
Which brings me back to my first idea:
Volatility generally increases in a bitcoin bull market and this trend can be found on the below chart. I use the Bitmex 7 day volatility chart as it tracks this signal most clearly. It can be found on tradingview.com. I go long volatility with ‘straddles and strangles’ when this line is hit and sell when we spike.
One of the reasons Bitcoin options are so attractive is due to the large build-up of leveraged traders on derivatives platforms like Bitmex. When this ‘Open interest’ grows large, combined with a trigger ( like COVID 19) you get options fireworks. The well known Twitter traders, who are constantly trying to call the direction of the market, create the bounty that fills the ‘long vol’ traders coffers.
Sounds simple? Simple but not easy. Once you go ‘long volatility’ your account simply bleeds money slowly until a big move in the price arrives, or doesn’t. This can be painful but it’s best to think about it as insurance against huge drops in price if you’re long spot Bitcoin.
My trade will work until it doesn’t so small bet size is important. When it fails I will need a new idea. Until then, please follow this series and my posts on Twitter. I’ll talk about bet size, the danger of selling options and more in the next post. Here’s hoping green oval below gets hit, and bounces.
Bitcoin Options Beginner — Best resources and first trade idea. was originally published in Coinmonks on Medium, where people are continuing the conversation by highlighting and responding to this story.