Cryptocurrency Derivatives Series: Call Update on ‘Bear Calendar Spread’

Couple of days ago, we spotted the back-to-back shooting stars and stated that these bearish patterns have potential to lead 3rd consecutive month's slumps, accordingly, advocated Bear Calendar Spread using CME Bitcoin Futures Contracts. Well, rest is history by now.

Call run through in brief: at spot reference: $8,299, as we expected BTCUSD to slide further over near term or so, we thought it would be wise to stay short in BTCV9 contracts at those levels and simultaneously added longs in CME futures of December delivery at the same level. 

The underlying price of BTCUSD (at Coinbase) has now been dropped below $7.5k mark after sliding below 21-EMAs with bearish crossovers, showed price dips of $877, thereby, our short leg has achieved its motive of arresting downside risks highlighted in our previous strategy.

For now, a sharp hammer pattern has occurred at $7,470 levels on intraday terms holding strong support at 7385 areas. If bulls manage to hold onto these levels, we can see sharp bounce back, otherwise, further downside potential below $6k or even up to $5,818 level is quite certain.

Hence, we wish to square off our short position advocated in our bear calendar spread, while the long leg remains intact on hedging grounds.

For traders, one should wait for the day whether the underlying spot (BTCUSD) breaches below 7385-7410 levels and participate in bearish rout with short leg and square off long leg, if it holds these levels, then ok to liquidate the short legs & book profits and participate in the potential bounce-back rallies with long leg. The long-leg shouldn’t be panic even if it shows weakness in between as it has December tenor. Please be noted that the strategy is best served on hedging grounds so far. Please also be noted that the recommendation was coupled with various fundamental, technical and other news flows, one cannot afford to think of the confined mindset and isolate the forecasting of the underlying trend. Never forget “always trend is your friend”, “never compete with the market & never be unwise to buck it”. Happy Hedging and trading as well, Cheers.