• The “butterfly strategy” protects against a possible bitcoin price drop of $47,000 by March’s end.
  • The strategy involved multiple trades and cost more than $20 million.

BTC Price Index and Live Chart – CoinDesk”>(BTC) options bet crossed the tape on Tuesday, aiming to profit from a potential short-term price drop in bitcoin with the floor at $47,000.

The trader purchased 100 lots for the March 29 expiry date on Greeks.Live and put options with strikes of $50,000 and $43,000. He partially funded this purchase by selling 200 tons of similar expiry expiry puts priced at $47,000.

A put option allows the buyer to sell an asset at a specified price in the future, but does not obligate them to do so. A buyer of a put option is implicitly bullish, whereas a buyer of a call option is bearish.

Greeks.Live informed CoinDesk that the so-called block trading comes at a cost of notionally over $20 million. Block trades are large transactions that are executed outside of the public market. They’re often associated with institutional activity.

The strategy is designed to maximize profits if Bitcoin falls below $47,000 by the day of expiration. Forecasts indicate that prices will drop over the next few days, but not below $47,000. The payoff chart shows the maximum profit in the middle and a loss fixed if the prices break the two ends. This is similar to the body of a butterflies. The strategy is known as a “butterfly bet”.

BTC Butterfly Strategy’s Payoff Diagram (Greeks.Live).

The simulated payout diagram shows maximum profit at $47,000 with breakeven levels of $44,201 and $44,770.

Adam, an analyst with Greeks.Live told CoinDesk that whales have added to their short positions. They are betting bitcoin will drop slightly before March 29.

Recent block trades were concentrated in either short volatility or short price. The majority of term selections were made before BTC’s halving. Adam said that traders may be holding spot positions and buying hedging.

Parikshit Miishra is the editor.