Bitcoin Goes Legit

Greetings Pit Crazies,


Not long ago, I was writing about how Bitcoin and the cryptocurrencies were leveraged and possibly destabilizing the market.


I swear that some of those big Bitcoin down days would jack the VIX 2 or 3 points as folks waited for the fallout.


That seems a little less likely today.


Some of the activity from sovereign countries is adding a lot of fuel to the Bitcoin-is-a-currency theory.


This also might be a way for developing countries to get away from the dollar.


Gold could be a loser, too, but there are other longer-term forces at work for gold as Griff spelled out over the past week.


There are lots of ways to play this idea of Bitcoin ascendancy and I highlighted one in the PitStop letter on Monday. (Shoot an email to if you’re not receiving that.)


There are two speeds: Bitcoin-related rallies and the gold slow grind.


Between those two there should be a trade idea.


The Need for Speeds


Speed 1 is Coinbase (Ticker: COIN) as a proxy for Bitcoin. 


The bitcoin exchange ebbs and flows on bitcoin fortunes and was up 10% yesterday — or 160% one-day realized volatility.


Recall, a 1% move in a stock per day is 16% vol, so COIN is on a tear.


COIN 90-day chart with volatility.


You could say the same for Riot Blockchain (Ticker: RIOT) or Marathon Digital Holdings (Ticker: MARA), which are both bitcoin miners and decent proxies for bitcoin. Those names were up 10%, as well.


Note that IV is very low in COIN as the move yesterday was near 3x 30-day vol. That is a signal that things are hopping, and I would just look for a 30-day out-of-the-money call spread to buy not more than 10% OTM. That’s what I did in the Power Moves Portfolio.


Speed 2 is the SPDR Gold Trust ETF (Ticker: GLD), with a .01 move today or about a 0% realized volatility. 


Vol is so low in GLD right now that just a simple calendar spread should do OK. The GLD July 16/Aug. 20 170-strike call calendar is only $1.30. I will sell some short term calls against what I own today.



GLD 90-day price and volatility with 30-day IV at year lows.


The cost of the COIN call spread should not be more than the expected decay in the calendar if I want one trade’s decay to pay for the other.


And I do!


I would expect one COIN call spread for every five GLD calendars. That way, you get both the direction and speed of the underlying working for your trade.


The Lesson: This is a technique we use all over Option Pit. Let volatility guide the trade type and use it to help express your opinions.


The Rundown


Power Moves Portfolio w/ Frank Gregory
Option Pit DC and Wall Street insider Frank Gregory and I run a portfolio approach to trading options with stocks that have good long-term prospects based on Frank’s K Street knowledge and my options expertise.

The live trade log is here, and I’ll have a full recap for you every Wednesday. 

I closed the Palantir (Ticker: PLTR) calls I owned for a 50% winner yesterday.

Pro Trading Room:
The Pro Room is Option Pit’s live access to Mark and myself during trading hours. Our Pro students post trade ideas with Mark and me during the entire trading session. 


      • Lots of Alibaba Group (Ticker: BABA) call buying in the room. I am still holding the BABA Aug. 16 320-strike calls I bought at $8.20. They’re trading at $10.50.  
      • Hershey Co. (Ticker: HSY) was drawing interest as paper bought some 180-level calls.


Robinhood Trader:
Option Pit CEO Mark Sebastian uses the Robinhood Gamma Radar to find order flow in active names.

We are keeping an eye on the airlines United Airlines Holdings (Ticker: UAL), Delta Air Lines (Ticker: DAL), American Airlines Group (Ticker: AAL) for today.


      • Palantir (Ticker: PLTR) July 16 26-strike calls closed for a 60%+ gain yesterday.
      • Mark is riding a ProShares Trust Ultra VIX Short Term Futures (Ticker: UVXY) July 02 27-strike put, which is flat for now.
      • He has nice looking long call trades in Ford (Ticker: F), ExxonMobil (Ticker: XOM) and Walt Disney Corp (Ticker: DIS).

Sharp Bets:

Each week, Option Pit CEO Mark Sebastian looks for low-volatility, mid-term duration call buying and put buying opportunities.


      • I subbed in for Mark last week and bought some Walmart (Ticker: WMT) July 23 139-strike calls for $1.55. They went up around 20%. I like WMT to $140, at least.  
      • Mark is riding Energy Transfer LP (Ticker: ET) freebie calls, sold half and owns the rest for credit a la Vol Trade Club/Trading Legion strategy


Trading Legion:
The Trading Legion is an intermediate-level education and a long strangle trading vehicle. The goal is to teach students the best times to buy options.


  • Fastly Inc. (Ticker: FSLY) is still in a nice uptrend.


Volatility Edge/Volatility Trading Club:

Volatility Edge is run by Mark and uses the proprietary Option Pit VIX Light indicator to guide volatility trading. The Vol Trade Club is run by me (AG), and employs a  long strangle strategy that seeks to use VIX future decay to pay for upside VIX, VXX and UVXY options.

The Option Pit VIX Light is still red, and the VIX broke 16 for the first post-COVID 15 close.


At this point, drops in VIX will likely come slower as it gets to the bottom of Zone 2 (13-18). 


For Volatility Edge


Mark added a long-term January put in VXX.  As I highlighted this weekend, the big short moves will be hard to come by..


      • Remember, a lot of vol strategies I use are market neutral. That means whether SPX or VIX go up or down, the positions still make money. This is a technique you can learn in the Volatility Trading Club and Volatility Edge!

To Your Trading Success,



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