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IBIT Positions as at 24 Jan 2025 - Paper Gains $8,680 in a month!

DividendGuy67
Publish date: Sat, 25 Jan 2025, 10:42 AM

Introduction

Previously, I shared that Bitcoin is one of 2 instruments that I believe will keep making new All Time Highs and it's just a matter of time.

I backed my belief with $$$ and trades. Here, I would like to share one of my current Bitcoin position in the US after Friday's close for future reference.

Bitcoin Instrument and Strategy 

Previously, I shared that IBIT is one of my 2 biggest Bitcoin instruments.​

For IBIT, my main strategy is called the "Covered Strangle".   This is a combination of owning the shares, and then, selling the Strangle around the Shares - you can think of this as a Covered Call with a CSP (Cash Secured Puts).   I call this a Ratio Covered Strangle because I own 1900 shares, sold 19 Covered Calls (eventually) but only sold 13 Cash Secured Puts.   

I deeply believe in both "strikes" and "expiry date" diversification, which you can see from below.

This is not a "sai lang" position, but represents a significant and a minority % of my total US portfolio. 

My current Positions

My Entry Timing

I did not enter all these positions at the same time.

Initially I started small.  Some time in December, after a period of continuous and deep study, I decided to own 1,800 shares (roughly representing my YTD profits in both Bursa and US) before end of December, because I wanted to park my profits into Bitcoin.  

Turns out the entry timing was TERRIBLE from a trader perspective!   Not surprising, as I chased and was impatient (FOMO) to wait for better entries - the bulk of my entry occured AFTER Bitcoin made new all time highs above $108k in mid December and started falling.   

At the time, I did not have any Covered Calls, because there were so many upcoming catalysts where I didn't want to cap the upside.   It is only after Trump inauguration mid this week, and after he did NOT announce a Bitcoin Strategic Reserve, that I started to lay in the Covered Calls.   Polymarket bet that US sets up a Bitcoin Strategic Reserve in the first 100 days has crashed, indicating that it will take longer - some speculates it might take up to 6 months, but whether it is Bitcoin, Bitcoin+Crypto, Crypto without Bitcoin is still up for speculations.

IBIT Price Chart

Price chart is interesting - calling out the following:

  1. Generally bullish trend with price consolidation after the $61.75 peak in mid December.
  2. Prices are currently above the purple anchored VWAP line since the peak, suggesting that the path of least resistance is up.
  3. There is strong support near $53.38 and rising, which is based on the blue anchored VWAP line since Trump won the election and the breakout occurred.
  4. Won't be surprised if next few months, prices are range-bound.

Summary of Results

  1. Shares (19 lots of 100 shares).   
    1. Paper gains 5.8% (equal to $6,170 / 107,146).
    2. However, I don't really care about the paper gains or losses here because my strategy to hold the shares is not yet for the price gains, for 2 reasons.
    3. First, my goal is longer term which can last years.   This is because, I believe Bitcoin will always rise, the main catalyst is the rising adoption of Bitcoin globally amongst institutions and increasingly the mass, due to its unique storage of value property that will eventually replaces gold, bonds, and other assets.    The other catalysts that will accelerate global adoption will be the US Bitcoin Strategic Reserve (now Crypto something instead), but even if that didn't happen, I am not worried because I think it's just a matter of time.  So, my eye is several years from now potentially i.e. today's move is just a distraction.
    4. Second, the shares allows me to sell a Covered Call more aggressively to be either ATM or NTM when I think Bitcoin is reaching a swing top with fat premiums, and other times sell Covered Calls even if it stays at prolonged depressed price without fearing a huge spike move up.  In the longer term, this generates larger income.
    5. It also fits my belief that if we trade an instrument that will eventually make new all time highs, price dips / corrections / crashes are opportunities
  2. CSP (Cash Secured Puts).   
    1. The target returns over 23 days average is 2.6%.
    2. In more detail, total premiums collected is $2,758 for 13 lots, averaging $212 per lot.  Average DTE (days to expiry) is 23 days.   The maximum returns over the average of 23 days is 2.6% (it can only be less than this, if require trade repairs). 
  3. CC (Covered Calls).  
    1. The target returns over 34 days average is 4.3%.
    2. In more detail, the total premiums collected is (larger than CSP) at $4,560 for 19 lots, averaging $240 per lot.  Average DTE is longer at 34 days.  The maximum returns, if the premium expires worthless, is 4.3%.  
    3. However, if prices really go up to hit the Strikes of all of my sell Calls, the win will be MUCH larger than just 4.3%, due to capital gains.  
  4. The average DTE is around a month.  
  5. If you look at the income coming from both the CSP and CC, essentially, I just created a "Synthetic Dividend" totalling say $7.3k a month, around 7% per annum.   Annualizing this could give me a Synthetic Dividend Income equal to 84% per annum.  This is aspirational - in reality, it won't be this high due to trade "repairs" and "rolls", but potentially offset by capital gains.

My prognosis about the future

I don't know the future.  However, my base case now is that Bitcoin is going to remain in a consolidation zone for a few months (?), when this is the time to start selling Covered Calls and CSP around my shares.  If Bitcoin stays sideways for majority of this year, then, the sum of my Options selling will give higher returns than the price gains from the shares.  However, my future actual returns is not dependent on what I think will happen above.

Summary and Conclusion

It's clear from above, that my entry timing into the shares are terrible and definitely below average for a trader.

However, the saving grace is 2 fold:

  1. I chose an instrument where I have unshakeable belief, that it's just a matter of time before it makes new All Time highs.  And when it does, I know the shares will be profitable again.   So, it didn't matter that my entry timing sucked big time.   Bitcoin has this habit of erasing your entry errors, and later, after it breaks out, it will make you look like a Super Trader as it keeps making new all time highs.
  2. Choosing an instrument that allows you to trade / sell options.  This can enhance your total returns - if IBIT shares stay flat with zero returns, if IV remains unchanged, then, I may have the chance to generate 84% per annum returns from this flat line ETF.

In short, as an Options seller/trader, you don't need to have to best entry timing to make monies.  

However, it is important to have a lot of the other skills as they matter more for the Options.   

Additionally, we must not be dogmatic about selling all the time - majority of the time, it really makes sense to sell, however, there will be certain times and zones when we should consider shares and certain times, zones, setups when we should consider buying the Option instead of selling.

Btw, the $8,600 paper gains in the attention grabbing title really doesn't matter, and is not day-to-day focus at all.  I only tally this up because I just wanted to write this article to share.  On normal days, I just ignore that because to win in the end does not require us to know what the paper gains are per se, but requires us to focus on areas that matters.

In more detail, the real focus is every week, every 2 weeks, the sell options expires worthless and we win - then the account will keep making new all time highs regardless of the stock price.   The stock price itself - its short term performance - doesn't matter in the long run when it makes new all time highs.  It can crash 50% from here and then recover 100% to go back to original price and our account will still make new all time highs due to our options.  As long as we remain a strong hand, don't capitulate, trade small, always use Cash Secure where the broker cannot force us to close our positions, given our understanding of Options+Charts+Trading, we can only win and that is almost a certainty, barring catastrophic end of the world event like Bitcoin going to zero.

If you don't understand, don't follow, else, you would be gambling.

For future reference.


Disclaimer:  Not financial advise.  Just a random guy on the Internet ;-).  As always, you are fully responsible for your own trading and investing decisions.

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