Investment Review №341. The Obvious and the Unbelievable

Idea summary

A tactical position for a rise in IBIT over an approximately 8-week horizon through the purchase of a call option. The idea is based on a combination of inflows into BTC ETFs, an attempted rebound from the support zone in BTC/IBIT, and continued interest in alternative assets amid geopolitical uncertainty. For a long call, the key scenario is one in which the underlying continues to recover without falling into a prolonged sideways range.

Key arguments 

• Inflows into BTC ETFs support demand. Rising inflows into spot bitcoin ETFs increase demand for the underlying asset and provide more stable support for further upside.
• The technical picture looks constructive. IBIT/BTC is attempting to rebound from the support zone, and for a long call, a directional recovery is the most favorable setup.
• Geopolitical uncertainty supports interest in alternative assets. During periods of rising external risks, part of the market tends to seek diversification through liquid instruments with exposure to crypto assets.

Risk management

If, on the expiration date of May 15, 2026, the price of the underlying asset is above $42 but below $43.88, the investor will incur a loss depending on the final price of IBIT. If the price of the underlying asset is below $41, the maximum loss will equal the premium paid, or $288. If the price of the underlying asset is above the break-even level of $43.88, the position will begin to generate a profit. The base-case scenario for the trade is to hold the position until the premium reaches the target level of $500.

Trade parameters

P/L of the option strategy