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Message
re: Bitcoin down 17% tonight.
Posted on 8/8/24 at 11:34 pm to thatguy777
Posted on 8/8/24 at 11:34 pm to thatguy777
I trade with BITO, but you could easily substitute any of the Spot Bitcoin ETFs, like FBTC or IBIT. This is definitely an arbitrage trade based on Bitcoin volatility.
All of the Spot Bitcoin ETFs and BITO are under tracking Bitcoin year to date. GBTC is the exception because it still had a sizable discount it was closing prior to January 11th when the Spot Bitcoin ETFs started trading. However the price charts don't include BITO's large dividends, and that makes the BITO price chart look bad in comparison. BITO and the Spot ETFs track more closely now with each other as long as you include BITO's dividends.
I don't personally think BITO will tank. It is the very first Bitcoin ETF. It is managed by ProShares which has the 12th largest ETF assets under management, just ahead of Fidelity. I think ProShares has like 140 different ETFs it manages.
BITO's dividends are based solely on how much money ProShares makes when it rolls it's futures contracts. By law, ProShares has to payout excess profits as distributions monthly. So there's no guaranteed dividend, but ProShares has done well. As long as there is good volatility, ProShares should do well and it should do even better if Bitcoin rises at a good clip. If Bitcoin were to trade completely sideways with no change in price that would be the absolute worst case, as BITO would gradually wither away from derivative price decay.
BITO was beating all of the Spot ETFs all year until recently. I think they are closer now.
I don't trade options. I suppose you can do something similar with options with less risk and better returns.
All of the Spot Bitcoin ETFs and BITO are under tracking Bitcoin year to date. GBTC is the exception because it still had a sizable discount it was closing prior to January 11th when the Spot Bitcoin ETFs started trading. However the price charts don't include BITO's large dividends, and that makes the BITO price chart look bad in comparison. BITO and the Spot ETFs track more closely now with each other as long as you include BITO's dividends.
I don't personally think BITO will tank. It is the very first Bitcoin ETF. It is managed by ProShares which has the 12th largest ETF assets under management, just ahead of Fidelity. I think ProShares has like 140 different ETFs it manages.
BITO's dividends are based solely on how much money ProShares makes when it rolls it's futures contracts. By law, ProShares has to payout excess profits as distributions monthly. So there's no guaranteed dividend, but ProShares has done well. As long as there is good volatility, ProShares should do well and it should do even better if Bitcoin rises at a good clip. If Bitcoin were to trade completely sideways with no change in price that would be the absolute worst case, as BITO would gradually wither away from derivative price decay.
BITO was beating all of the Spot ETFs all year until recently. I think they are closer now.
I don't trade options. I suppose you can do something similar with options with less risk and better returns.
This post was edited on 8/8/24 at 11:44 pm
1
Posted on 8/8/24 at 11:43 pm to 98eagle
Thanks for the info and awesome you have a great strategy. I think this can be refined and be very opportunistic if dialed in with options. Maybe selling put spreads and buying upside calls on pull back and selling call spreads buying puts at top of range, problem is there are not options on the spot etf’s yet. I’m long feth and fbtc and wish I could trade options around them right now.
Need to find the right instrument to make it work
Need to find the right instrument to make it work
Posted on 8/8/24 at 11:49 pm to thatguy777
I believe you can buy and sell options with BITO and BITX. I thought they would already be available for the Spot ETFs, but the SEC is taking longer.
Posted on 8/8/24 at 11:55 pm to 98eagle
You can, but as I mentioned earlier, BITO and BTC aren’t necessarily correlated so that provides complications. Also, it appears other risks are involved. Options flow on BITO has been very bullish lately.
Posted on 8/9/24 at 12:04 am to thatguy777
Good point.
I forgot one thing I learned today talking with a Fidelity broker. I always thought that I had to hold purchased shares for 2 business days before I could sell them. That's not totally true. If you have settled cash in your account, you can buy all the shares you want using settled cash and you can immediately sell the shares that you just bought without any Good Faith trading violation. That will be a game changer for me as I keep a good amount of cash in my accounts. I can basically day trade without being a day trader.
If I see Bitcoin pullback say $2K at some point in the day, I could immediately sell a stack of BITO and buy BITX. If an hour later Bitcoin recovers I can reverse the trade. Before, unless I already was holding BITX from other trades, I thought I had to wait 2 business days before I could reverse the trade. Now that I know that I can day trade within my settled cash amounts, I will almost for certain be opening and closing more trades.
I forgot one thing I learned today talking with a Fidelity broker. I always thought that I had to hold purchased shares for 2 business days before I could sell them. That's not totally true. If you have settled cash in your account, you can buy all the shares you want using settled cash and you can immediately sell the shares that you just bought without any Good Faith trading violation. That will be a game changer for me as I keep a good amount of cash in my accounts. I can basically day trade without being a day trader.
If I see Bitcoin pullback say $2K at some point in the day, I could immediately sell a stack of BITO and buy BITX. If an hour later Bitcoin recovers I can reverse the trade. Before, unless I already was holding BITX from other trades, I thought I had to wait 2 business days before I could reverse the trade. Now that I know that I can day trade within my settled cash amounts, I will almost for certain be opening and closing more trades.
Posted on 8/9/24 at 12:20 am to 98eagle
Yea all you need is 25k and margin account to avoid all of that
Posted on 8/9/24 at 12:23 am to thatguy777
Thanks. Yeah, the broker told me that as well that I could use margin accounts or change my accounts to margin accounts.
Posted on 8/9/24 at 12:39 am to 98eagle
Thanks. Yeah, the broker told me that as well that I could use margin accounts or change my accounts to margin accounts.
One other thing I wanted to mention about BITO. Through about May, BITO was outperforming the Spot ETFs by about 10%. My gut feeling is that once Bitcoin breaks through $75K and goes on a faster ascent, I believe that BITO will start out performing the Spot ETFs again. When Bitcoin has consecutive sideways or downward months, I believe that BITO might underperform the Spot ETFs. I believe this might be the case that rolling futures contracts is.much more profitable when Bitcoin is rising in price plus with volatility. But when volatility is low and Bitcoin is trading sideways, decay will make BITO underperform.
One other thing I wanted to mention about BITO. Through about May, BITO was outperforming the Spot ETFs by about 10%. My gut feeling is that once Bitcoin breaks through $75K and goes on a faster ascent, I believe that BITO will start out performing the Spot ETFs again. When Bitcoin has consecutive sideways or downward months, I believe that BITO might underperform the Spot ETFs. I believe this might be the case that rolling futures contracts is.much more profitable when Bitcoin is rising in price plus with volatility. But when volatility is low and Bitcoin is trading sideways, decay will make BITO underperform.
This post was edited on 8/9/24 at 12:40 am
Posted on 8/9/24 at 1:13 am to 98eagle
quote:
Basically I pretty much ignore news and charts. I just trade on Bitcoin's price alone. Whether Bitcoin is falling or rising, I'm not fazed. With my trading mind set I have no fear or greed. My whole goal is to increase my BITO shares without investing any new capital. I don't try to predict tops and bottoms. My trades are made in the up and down trends. I know Bitcoin will always recover and hit my reversal trigger points in this cycle. At least that is my mindset. What I do requires a lot of discipline. It is also risky. There are no guarantees.
I have been following your posts in this thread and while it seems like you have a “plan” based on your comments, it also seems like your plan was just drum up out of your anecdotal experience on a very small timeframe (relative to most financial products and back testing).
How did you come up with your plan? Have you checked to see if it worked before you implemented it? What are the biggest risks? How do you come up with the trigger points? Etc etc.
I don’t expect you to answer any/all of these questions, but they’re food for thought from me. You talk like you couldn’t care less about the direction of bitcoin and you’re just trading volatility, but then you spend a couple paragraphs talking about how your plan doesn’t work if bitcoins doesn’t ascend in price nor does it work with low volatility. I’m still intrigued, but I’m a lot more skeptical at this point. Just because it had worked doesn’t mean it works.
This post was edited on 8/9/24 at 1:21 am
Posted on 8/9/24 at 9:25 am to slackster
quote:
I have been following your posts in this thread and while it seems like you have a “plan” based on your comments, it also seems like your plan was just drum up out of your anecdotal experience on a very small timeframe (relative to most financial products and back testing).
How did you come up with your plan?
I started accumulating Bitcoin and GBTC since 2016. I switched all of my GBTC to the Spot ETFs in January this year and then discovered BITO and BITX around February this year from reading other forums. I just came up with my strategy on my own and have been tweaking it and adapting it to how Bitcoin has behaved since March this year. From my experience with Bitcoin I have seen it have pullbacks and dips very frequently but I know that from past experience that it always recovers and moves upward. Once I saw I had access to trade a 2X and 1X Bitcoin ETF, it seemed like a good idea to try and capitalize on Bitcoin volatility by
arbitrage trading these ETFs during dips and pullbacks and the subsequent recoveries. I figured if Bitcoin is going to go up and down very frequently, why not start trying to take advantage of this.
quote:
Have you checked to see if it worked before you implemented it?
No, I just started testing my theory with small amount trades. Once I started seeing some success, I kept doing this, learning along the way and making tweaks.
quote:
What are the biggest risks?
There are several biggest risks. The following are just three.
The first is you try this and Bitcoin collapses to zero and you lose everything. However, I think that is an infinitesimally small risk
The second is that you try this with too much of your portfolio or with too much money at a time when Bitcoin falls dramatically and you have one or more open trades (so you are holding BITX), and you instantly see a big loss at a 2X rate. Your emotions and impatience get the best of you, you sell out and lock in a huge loss. I started with small amounts just testing and gradually increased the amounts I was risking to fit the risk/reward I was willing to take. I've had enough success now that even if I got burned bad on a trade or two it would likely not hurt me enough to stop my strategy. I could see my strategy burning some people trying it, so it's not for everyone. I'm just sharing what I do. Anyone can make their own decision if they want to try this or some similar strategy and proceed at their own risk.
The third is you try this strategy in the wrong Bitcoin cycle. I'm only doing this in the current cycle after the halving into the top of the Bitcoin top that I perceive happens maybe sometime between the end of this year and mid next year since historically there has been a massive pullback. I will suspend and restart my strategy and amounts when I think it's appropriate for me.
quote:
How do you come up with the trigger points
I had no idea the best trigger points to start out with. I started with pullbacks that I perceived amounted to $5K. So hypothetically, if Bitcoin were trading at about $55K, I waited until Bitcoin dipped to $50K, then I switched BITO to BITX and reversed the trade when Bitcoin recovered to $55K. I soon found out that those trades would take too long, so I tried $3K dips and recoveries. Then I realized I would do better with $2K pullbacks and recoveries. These were working well in April and May because the volatility amplitudes and frequency were really nice for this strategy. Then I experienced June when Bitcoin had low amplitude dips and long recovery periods. So I reduced my trades to $1K dips and recoveries and that is where I am at now as I have many more opportunities to incrementally be successful in smaller amounts.
quote:
I don’t expect you to answer any/all of these questions, but they’re food for thought from me. You talk like you couldn’t care less about the direction of bitcoin and you’re just trading volatility, but then you spend a couple paragraphs talking about how your plan doesn’t work if bitcoins doesn’t ascend in price nor does it work with low volatility. I’m still intrigued, but I’m a lot more skeptical at this point. Just because it had worked doesn’t mean it works.
I guess my words were somewhat confusing. I do care about Bitcoin's price in that I ultimately want it to go sky high. But in my trading mindset I could care less. I know Bitcoin will eventually keep going up, but there will be lots of ups and downs and I can capitalize on that in the meantime whether Bitcoin goes up, down or sideways as long as there is enough volatility where I can open and close my volatility trades.
I do make successful trades when Bitcoin is falling. I made 3 trades this week as I opened and closed trades after the big pullback and subsequent rollercoaster recovery back to above $60K. I'm about to go open my 4th trade this week since I see Bitcoin has dipped below $60K.
In summary all that I want to do is increase my BITO shares without investing new capital. I believe Bitcoin will recover and go much higher over time. Gaining more shares along the way makes me wealthier and my dividends are increasing as I gain more shares.
What I do is risky but works for me. I sometimes close out a trade at a loss near the end of the month, if I already have multiple successful trades and in taking a loss on some trades still results in increased shares for the month. I do that because I am addicted to BITO's very large dividends.
This post was edited on 8/9/24 at 9:38 am
Posted on 8/9/24 at 9:55 am to 98eagle
Thanks for sharing so much info. This is very interesting to follow and keep an eye on, and helpful for learning. A lot of people on this board share very vaguely as if sharing with ~30 people would somehow dry up their honeyhole. So thanks for being so detailed and clear
Posted on 8/9/24 at 10:40 am to kung fu kenny
You're welcome. I did open my 4th trade this morning when Bitcoin was approximately $60,350. I could have opened it below $60K but I missed that typing my last response. I still opened the trade anyway. I'm pretty busy today, and I can't check Bitcoin's price 24 x7, but when I notice that Bitcoin is above $61,350 I will reverse the trade whether that happens in the next 5 minutes or it takes a couple of weeks. I have a good bit of settled cash in my account so I can basically day trade now. If I didn't have an adequate amount of settled cash in my accounts, I would change them to margin accounts so that I could basically day trade without getting Good Faith violations from Fidelity.
My point about opening my trade at $60,350 today when I was looking to open a trade at below $60K, is that I can't perfectly trade at exact Bitcoin prices. Bitcoin's price moves up and down hundreds of dollars in minutes. By the time I open Fidelity and get started to trade, Bitcoin can change in either direction by hundreds of dollars. I just decide like I did to open a new trade when Bitcoin was at $60,350. Now that I did that, I can't perfectly reverse the trade at $61,350. That's just my reversal trigger point. Bitcoin may fly by that to who knows, $62K, $64K or more before I notice and log into Fidelity to make the trade. Bitcoin may get to $65K and I am busy and miss the reversal opportunity because Bitcoin drops back down to $61K before I notice. So it's not a perfect process. I try to keep an eye on Bitcoin throughout the day so I can make more trades. But I also like to have fun and do other work, etc. so I can't keep an eye on everything. I think one thing that would help me is to get alerts on Bitcoin's price or at least BITX's price or both. I should probably see about having automatic trading rules if that is feasible to set up the opening and/or reversal trades automatically. If anyone figures that out, please share in the Crypto thread.
My point about opening my trade at $60,350 today when I was looking to open a trade at below $60K, is that I can't perfectly trade at exact Bitcoin prices. Bitcoin's price moves up and down hundreds of dollars in minutes. By the time I open Fidelity and get started to trade, Bitcoin can change in either direction by hundreds of dollars. I just decide like I did to open a new trade when Bitcoin was at $60,350. Now that I did that, I can't perfectly reverse the trade at $61,350. That's just my reversal trigger point. Bitcoin may fly by that to who knows, $62K, $64K or more before I notice and log into Fidelity to make the trade. Bitcoin may get to $65K and I am busy and miss the reversal opportunity because Bitcoin drops back down to $61K before I notice. So it's not a perfect process. I try to keep an eye on Bitcoin throughout the day so I can make more trades. But I also like to have fun and do other work, etc. so I can't keep an eye on everything. I think one thing that would help me is to get alerts on Bitcoin's price or at least BITX's price or both. I should probably see about having automatic trading rules if that is feasible to set up the opening and/or reversal trades automatically. If anyone figures that out, please share in the Crypto thread.
Posted on 8/9/24 at 10:40 am to kung fu kenny
Accidentally submitted my above post twice
This post was edited on 8/9/24 at 10:41 am
Posted on 8/9/24 at 11:42 am to UltimaParadox
quote:You should focus that triggering towards actual companies that are a net negative on society such as "Big Food". Very little good comes from those companies. If you aren't involved with Bitcoin then nothing about it affects you.
The price is irrelevant to me. I'm triggered by the very existence of this massive waste of resources.
Posted on 11/11/24 at 9:38 am to Curb Your TDS
quote:How is Tom Lee looking these days?
The same Tom Lee that said last week that the market was going to rip higher
Posted on 12/11/24 at 3:39 pm to Curb Your TDS
quote:Looks like the market did rip higher
The same Tom Lee that said last week that the market was going to rip higher
SP500 up 14% since this post (in only 4 months)
Bitcoin up 72% since this post
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