The 'long call butterfly' trading strategy using Bitcoin options suggests that the price will reach $95,000 by the end of October. The trade, amounting to approximately $3.2 million, involves buying call options expiring on October 30 with strike prices of $90,000 and $100,000 while simultaneously selling twice as many call options at $95,000. The transaction was executed in five blocks, each consisting of 1,000 long call options at $90,000, 2,000 short call options at $95,000, and 1,000 long call options at $100,000, according to Laevitas data. The net initial payment for the combined position was $3.17 million.
This strategy yields maximum profit if Bitcoin is around $95,000 at expiration, with a positive gross return possible in the range of $90,000 to $100,000. Outside of this range, the profit is zero, and the trader risks losing the $3.17 million paid to open the position. In other words, the trader appears to be betting on Bitcoin rising from approximately $85,000 to $95,000 over the next four weeks. This viewpoint generally aligns with the daily chart of Bitcoin, which shows implicit resistance between $85,000 and $98,000. There are no levels in this zone where Bitcoin has previously stopped or consolidated, so, all else being equal, the current momentum could push it to $98,000 in the near term.
The 'butterfly' was not the only sign of growing bullish positioning. Traders also increased demand for upside through call options, leading to a rise in short-term risk reversals. 'Risk reversals were also volatile: at the forefront, RR aggressively flipped in favor of calls during the move to $85,000 before slightly correcting this morning,' noted Laser Digital in a memo sent to CoinDesk.
Related articles
