Week 42, Trade 42 : $BTC COVERED CALL
📈 Week 42, Lesson 42
"There is no single market secret to discover, no one right way to trade the markets." – Jack Schwager
We are into Week 42 of the Fifty Two Trades in Fifty Two Weeks. Thank you for reading.
“The 52” deep dives into one trade every week, targeting traders with zero or little trading experience. But I hope that my pro trader friends find this as useful. For details on why I am doing this and who is this for, please read the About section on top, which I will update from time to time.
Most trades that we take will be medium (3-4 weeks) to long term in nature. We might do some swing trading here and there if opportunity presents, but always with proper risk management. After all, our purpose is to make money, not lose sleep over it.
You can track our trades and progress live here at this Link
Over 10 years in banking and now 12+ years dealing with nuances of crypto, I have learned some very hard lessons. I intend to share them transparently as we go. More importantly, please keep the comments and feedback coming, so I know we are on the right track together.
📊 Portfolio Update - Open Trades
We continue to navigate the market cautiously, balancing between risk and reward. Stay tuned for more updates as we adjust our positions based on market conditions.We’ll continue to monitor the open positions closely and adjust as needed to navigate the range-bound market effectively. Stay connected on Telegram for real-time updates and insights.
If you have any questions, ideas, or feedback, please feel free to DM me on Substack or Twitter, Let's continue to navigate the market together!
UNDERSTAND MARKET CYCLES TO STAY AHEAD
Markets move in cycles, not straight lines. Recognizing where you are in the current cycle is crucial for selecting the right strategy and managing risk. Whether it’s equities, crypto, forex, or commodities, every market alternates between expansion, peak, contraction, and recovery—just like the economy. Traders who understand these phases can adjust their approach to stay in sync with the broader movement, rather than getting caught on the wrong side of momentum.
For instance, during an uptrend (bull phase), trend-following strategies like breakouts and momentum trading tend to perform well. In a range-bound or corrective phase, mean-reversion tactics or trading support/resistance zones are more effective. When volatility spikes and direction is unclear, it's often smarter to reduce position size or step back entirely. Matching your strategy to the market phase keeps you aligned with the flow instead of fighting it.
How to Use Market Cycles in Your Trading:
Study Price Structure: Identify higher highs and higher lows (uptrend) or lower highs and lower lows (downtrend).
Use Leading Indicators: Tools like RSI, MACD, and moving averages can help spot shifts in momentum.
Observe Volume: Volume expansion often confirms trend strength; fading volume can signal a cycle shift.
Know When to Adapt: Don’t cling to a strategy that worked last month if the cycle has clearly changed.
Zoom Out: Analyze higher timeframes to get a broader view of the cycle before acting on short-term moves.
Understanding market cycles gives you context for every trade. It’s not about predicting the future—it’s about recognizing the present so you can respond smartly. The market is always evolving; your mindset and strategy should too.
🌎 Quick Macro & Crypto TL;DR
THE GOOD:
Tariff delays spark relief rally: Trump hit pause on new EU/China tariffs, and a U.S. court blocked most existing ones. Global indexes rallied, with the S&P 500 and Nasdaq closing strong on May 27.
Nvidia + crypto = risk-on: Nvidia crushed earnings again, keeping AI momentum alive. Bitcoin held above $100K as the SEC dropped lawsuits against Binance and Coinbase, boosting sentiment.
THE BAD:
China’s factory funk continues: PMI stayed stuck below 50, pointing to weak industrial activity. Asian markets underperformed on signs of fading global demand and persistent housing woes.
Tech sanctions return: The U.S. imposed fresh export curbs on China’s chip ecosystem. EDA stocks like Cadence and Synopsys tanked ~10%, reigniting fears of a drawn-out tech war.
Inflation soft, but messy: April CPI cooled to 2.3%, but the Fed remains cautious. Stagflation whispers and tariff drama are clouding the rate cut timeline, keeping markets twitchy.
THE WORSE:
Tariff flip-flops = policy fog: Markets cheered blocked tariffs, but Trump’s on-again/off-again tactics are draining conviction. Policy instability is starting to weigh on long-term confidence.
Macro headwinds stack up: With China slowing and Europe soft, global growth looks fragile. Even temporary ceasefires (Gaza, Ukraine) aren't solving deeper geopolitical risk exposure.
For more regular insights into macro and crypto trends, subscribe to our weekly newsletter: 5-Minute Macro and Crypto Weekly.
📈 Week 42, Trade 42 : $BTC COVER CALL
Bitcoin is consolidating near its all-time high, reflecting a market in a state of equilibrium between bullish institutional interest and bearish macroeconomic factors.
On the bullish side, corporate entities like MicroStrategy continue to accumulate Bitcoin, with MicroStrategy's holdings now exceeding 580,000 BTC. Additionally, open interest in Bitcoin futures has reached record highs, indicating strong institutional participation. These factors suggest a robust underlying demand that could propel BTC towards the $120,000 mark.
Conversely, rising bond yields in the U.S. and Japan are exerting downward pressure on risk assets, including cryptocurrencies. If yields continue to climb, they could trigger a risk-off sentiment, leading to a potential correction in Bitcoin's price.
Strategic Outlook
Given the current market dynamics, a prudent approach would involve capitalizing on the potential upside while hedging against downside risks. Our strategy is to sell call options at the $120,000 strike price, collecting premiums while anticipating a breakout. Simultaneously, using the premiums received to purchase put options at the $95,000 strike price with a June 27 expiry could provide protection against a potential downturn.
Trade Plan (June 27 Expiry):
Sell 2 BTC $120K Calls @ $2,440 total ($1,220 each)
Buy 2 BTC $95K Puts @ $2,540 total ($1,270 each)
Net Debit: $100
This trade costs just $100 to deploy and positions us for a potential move lower in BTC while capping exposure to a runaway upside. The trade begins to profit meaningfully if BTC moves toward or below $95K, and is fully protected if sentiment deteriorates sharply.
This balanced strategy allows for participation in potential gains while mitigating risks associated with macroeconomic uncertainties. As always, it's essential to monitor market developments closely and adjust positions accordingly.
💡 CONCLUSION
Bitcoin currently stands at a pivotal juncture, consolidating near its all-time high of approximately $112,000. This equilibrium reflects a tug-of-war between robust institutional demand and mounting macroeconomic pressures.
On the bullish front, corporate giants like MicroStrategy have significantly increased their Bitcoin holdings, now exceeding 580,000 BTC . This accumulation underscores a strong institutional conviction in Bitcoin's long-term value. Additionally, Bitcoin futures open interest has surged to record highs, surpassing $80 billion , indicating heightened market participation and optimism.
Conversely, rising bond yields in major economies like the U.S. and Japan are exerting downward pressure on risk assets, including cryptocurrencies. The increase in yields could signal a shift towards a risk-off sentiment among investors, potentially leading to a correction in Bitcoin's price.
Strategic Trade Plan (June 27 Expiry):
Sell 2 BTC $120K Calls @ $2,440 total ($1,220 each): This positions us to capitalize on the premiums if Bitcoin remains below the $120,000 mark, anticipating resistance at this level.
Buy 2 BTC $95K Puts @ $2,540 total ($1,270 each): This provides downside protection, profiting if Bitcoin's price declines below $95,000.
Net Debit: $100
This strategy offers a balanced approach, allowing participation in potential gains while mitigating risks associated with macroeconomic uncertainties.
The minimal net debit ensures limited exposure, with the potential for significant upside if Bitcoin's price moves favorably.Stay tuned for further updates, and remember—NFA (Not Financial Advice), always DYOR (Do Your Own Research) before making investment decisions! You can track all our trades here.
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