Week 7, Trade 7: Long $SUNDOG & Adding More $ETH Options

Macro is getting better as we approach Sept rate cuts

Week 7, Lesson 7

“The main purpose of the stock market is to make fools of as many men as possible.” Bernard Baruch

We are into Week 7 of the Fifty Two Trades in Fifty Two Weeks. Thank you for reading.

“The 52” deep dives into one trade every week, targeting traders with zero or little trading experience. But I hope that my pro trader friends find this as useful. For details on why I am doing this and who is this for, please read the About section on top, which I will update from time to time.

Most trades that we take will be medium (3-4 weeks) to long term in nature. We might do some swing trading here and there if opportunity presents, but always with proper risk management. After all, our purpose is to make money, not lose sleep over it.

You can track our trades and progress live here at this Hashtalk Link

Over 10 years in banking and now 12+ years dealing with nuances of crypto, I have learned some very hard lessons. I intend to share them transparently as we go. More importantly, please keep the comments and feedback coming, so I know we are on the right track together.

Portfolio Update - Open Trades

The market still remains range-bound, with key assets consolidating as they await the next catalyst. Despite the broader market's lack of movement, our portfolio continues to perform well. Since our first trade on 1st July, we've achieved a 30% RoI. Here’s the status of our current trades:

Trade 3: Spot $MOTHER

Status: Holding 75%

P&L: Currently down by 23.60%, with the market price at $0.0421. Since we took profit on 25% of our position our loss is very limited. We're monitoring closely, with a profit target set at $0.09 for the remaining position.

Trade 4: Spot $WIF (Position 1)

Status: Holding 100%

P&L: Down by 15.45%. The market remains range-bound, but with rate cuts coming we have cut our take profit targets to $2 & $2.50 to secure profits and free-up our capital for the next trade

Trade 5: Spot $SOL

Status: Holding 50%

P&L: Open 50% of the position is up by 12.37%. The remaining half of the position has been exited at $150, locking in gains of 27%.

Trade 5: Spot $BTC

Status: Holding 50%

P&L: Open 50% of the position is up by 11.46%. The remaining half of the position has been exited at $58.5K, locking in gains of 18%.

Trade 5: Spot $WIF (Position 2)

Status: Holding 50%

P&L: Up by 15%. Exited half of the position at $1.50 with gains of over 25%, and the rest is held as we eye future market movements.

Trade 6: ETH Options - PUT SELL

Status: Holding.

P&L: Neutral. We sold the option at $48.50 and the current price of the option is $14.60, so even if we were to close our position today, we would end up making $33.90 per option we sold. Though we plan to hold our position for the next 10 days and close the whole premium of $48.50 per option as our profit.

We’ll continue to monitor these positions closely and adjust as needed to navigate the range-bound market effectively. Stay connected on Telegram for real-time updates and insights.

Though if we see any more upward movement in the market, we would increase our sell trigger for all our open positions. To keep a track of all the updates join our Telegram group to get the alpha as they happen.

If you have any questions, ideas, or feedback, please feel free to DM me on Substack or Twitter, Let's continue to navigate the market together!

Quick Macro & Crypto TL;DR

THE GOOD

• Market recovery as data from the US signals a soft landing, bringing back the "goldilocks" economy.
• Positive macroeconomic data leads to optimism for a 25 bps rate cut by the Fed in September.

THE BAD

• China struggles with a plunging housing market and rising unemployment, despite liquidity injections by PBoC.
• Europe faces another month of declining industrial activity, with Germany hit hardest.

THE UGLY:

• Rising concerns over the U.S. economy as policies promoted by Harris will contribute to the acceleration of national debt, causing foreign bondholders like Japan and China to sell off U.S. bonds.
• Bitcoin remains stagnant despite positive macro data, with no clear narrative or demand drivers, leaving the market in a state of limbo.

For more regular insights into macro and crypto trends, subscribe to our weekly newsletter: 5-Minute Macro and Crypto Weekly.

The Case for Crypto Options

We did well with the $ETH puts that we sold last last week. Perfect times for such a trade, and such a structure (options vs spot or futures). Why did we prefer options? Let’s find out the fascinating world of options, when to use them and most importantly how options work in the crypto world.

Remember last week? KISS framework? Keep It Simple Stupid

Our $ETH options was 2 weeks trade. I didn’t make it 1 week (too short to earn anything as their is hardly any time value) or 4 weeks (too much uncertainty as soon as we get too close to Sept FED meeting). We kept the trade simple - sold puts to earn premium.

When to Use Crypto Options

1. When BTC and SOL seem rangebound. Instead of using leverage or staying in spot, one can use options instead and pay (or earn) a little premium depending on your view
2. You don’t want to leverage. If you use leverage you can get stopped out. That is never nice. With options you are riding till the end. But your crypto options can also expire worthless if your strike is not reached when you buy an option.
3. Extra leverage. When there was a massive move on 5th August, options would have been amazing as that will alway make you more money than just spot or 5-10x leverage. That also allows you to take a larger positons than posting too much collateral for your naked short / long position
4. Finite risk - crypto futures have ruined many but with options your downline is limited in case you are buying options. It’s like paying a premium for life insurance. In crypto, weekends alone are such a risk that many can get ruined on futures. Options are better in such a scenario
5. Reduce cost using spreads or other structured products - You can make a customised options with a customised payout with very specific views using OTC options with like of QCP or TDX or unchain with newer platforms like Ithaka. Happy to make intros to all. DM me.

For example QCP offering below structure as of 21st August 2024:

12-month USD Fixed Deposits are paying 3.5 - 4.0% p.a. For the same tenor, you can lock in 9.5% p.a. in crypto cash and carry. This seems particularly attractive, especially if the Fed decides to embark on a much more aggressive cutting cycle.

| index ? | ? Basis | ? AnnRate(%) | ? Tenor |? ?

|:--------|--------:|-------------:|--------:|? ?

| 28MAR25 | 3333.18 | ? ? ? ? 9.39 | ? ? 219 |? ?

| 27JUN25 | 4776.89 | ? ? ? ? 9.51 | ? ? 310

When Not to Use Options

1. Time frame - crypto options are very illiquid outside of 3 months. I usually stick to 2 weeks to 4 weeks options and rarely go out to 6 months and pay a larger premium if vols are low or if I have a very high conviction on a trade. For example last year, I traded 12 month options to expire in June this year. BCT was around 20K and I was certain we will hit all time high this year. I sold those back as soon as we hit ATH this year. Keep in mind there is a severe time decay as you come closer to strike date (also known as theta). You are losing option value each day you are keeping it open. Hence more short term options
2. Crypto options are not liquid with wide spreads Cost to get in and cost to get out is higher as there are very few market makers in crypto options and Deribit has cornered 75% of the market. So think carefully when you get in and try not to get out easily.
3. Volatility and prices around events get absurd sometimes - crypto is notorious for daily dramas. Add macro masala on top and you have absurd volatility sometimes. That is what makes crypto options very explosive. No market maker wants to get caught on the wrong side of a trade and wants premium for that risk - aka higher price. It’s best when you can position yourself before a massive event. You can be wrong, but you will loose a very little premium.

Overall, it’s about knowing your macro, and taking a view on direction of the market like any other trade. What you need to decide is how will the market get there? Range bound and straight line, range bound and dip or another exponential rally? And like everything in life - how much is that insurance going to cost me?

Week 7, Trade 7: More $ETH Options and Long $SUNDOG

Rangebound $ETH

Given the success of our last week option trade and the market still being rangebound with some high conviction meme plays being brewed on Tron. So we are going to take a small trade by buying $SUNDOG on Tron & selling more $ETH put options.

SELL $ETH $3000 CALLS & $2500 PUTS

We're selling call option contracts for $ETH with a strike price of $3,000 and put option contracts for $ETH with a strike price of $2,500 at an expiry date of August 30th (about 1 week duration).

Current $ETH price is at 2626. The premium we earn for selling call option with a $3,000 strike price is 0.0095 $ETH or $24.9 & premium for selling put option with a $2,500 strike price is 0.0280 $ETH or $73 for 1 week exposure. The total premium we receive is $98, That is a monthly return of 14.9% (3.73%x 4) or annualised return of around 179.1%. We are taking an exposure for a total of 5 ETH, that is a max capital lock up of US$ 12,925. We earn a total premium of $490.

Our strategy is to hold these options until expiry. If $ETH falls below $2,500, we are happy to buy back 5 $ETH at $2500 for a total of $12,500. If the price of ETH is to go above $3,000 before 30th August we are happy to the pay the margin above $3,000 because if ETH crosses $3,000 the overall market would turn into a bullish uptrend turning all of our open positions into profit.

For our detailed thesis on ETH Options trade, read here.

Bullish $SUNDOG

As we've discussed in all our previous trades, memes are currently dominating the market, with everyone focused on memecoins. A prime example is Pump.fun, which has generated nearly $100M in revenue since its launch eight months ago.

However, with a slight pullback on memes on Solana, Tron has ignited the memecoin mania this weekend with launches like $SUNDOG, $SUNCAT, $FUROR, and $Tbull. We've been actively promoting the Tron meme narrative in our Telegram channel. Over the weekend, we invested in $SUNDOG at $0.049, when the market cap was around $50M, and we shared this trade on our Telegram channel. Now, let's delve into the reasoning behind this decision:

Why Memecoins on TRON?

1. Strategic Backing by Justin Sun: TRON’s founder, Justin Sun, has launched SunPump, a memecoin launchpad on TRON, signaling strong institutional support. With a $10M "Meme Ecosystem Boost Incentive Program" TRON is providing substantial resources for new tokens, increasing the likelihood of successful projects.

2- Innovative Ecosystem: TRON is implementing a stringent review process for memecoins to prevent rug pulls, setting a higher standard of trust and safety compared to other platforms. This enhances the credibility of memecoins on TRON, making it a more secure environment for investors.

3- Increased Listing Opportunities: TRON promises that any token maintaining a $1M daily volume for three consecutive days will be listed on Poloniex, providing immediate liquidity and visibility for successful projects.

4- Market Timing: With the recent dip in the broader memecoin market and the underperformance of leaders like Pump.Fun, TRON's entry with SunPump could capture the attention of traders looking for new opportunities, especially with the added security and support TRON is offering.

5- Potential Market Reignition: The memecoin market has cooled down, but TRON’s strategic entry with well-resourced backing could reignite interest, particularly by drawing in those disillusioned by the risks and losses on other platforms.

6- Growing TRON Ecosystem: TRON’s ecosystem is expanding, and focusing on memecoins within this network could position us early in a growing market. As TRON continues to gain traction, the memecoins launched on SunPump could see significant appreciation.

By focusing on memecoins on the TRON blockchain, will align itself with a platform that is proactively addressing past industry pitfalls while providing the necessary resources and support for future growth.

This strategic shift could offer both security and substantial upside potential in the overall evolving memecoin market.

Why $SUNDOG?

1- Bullish Community- Backed by Justin Sun, $SUNDOG has attracted a wave of supporters and investors who are continually buzzing about it.

2- Top memecoin on TRON ecosystem- $SUNDOG is currently the biggest memecoin according to MC and volume on TRON blockchain

How to buy $SUNDOG?

Since it’s on a new chain and not listed on any CEX as of yet here is how you can buy $SUNDOG?

Step 1: Create TRX Wallet- https://www.tronlink.org/

Step 2: Transfer Funds to the wallet using the Rango Bridge: https://app.rango.exchange/

Step 3:? Trade $SUNDOG on DEX (select ‘Tron Alliance List’ while trying to do swap):

https://sunswap.com/#/v2?outputCurrency=TXL6rJbvmjD46zeN1JssfgxvSo99qC8MRT

Also you can see the trading chart here: https://www.dextools.io/app/en/tron/pair-explorer/TDR7rpU33hToG8qo9i676V56bzcjkpjqox?t=1723773048967?

Hashtalk Crypto Trading Framework for $SUNDOG

Here is the link to Crypto Trading Framework and its template that you can follow live

Conclusion

The seventh trade of “The 52” is Sell Calls & Puts on $ETH & Long $SUNDOG, it is a short term trade with a time horizon of 1 to 3 weeks.

SELL CALLS & PUTS ON $ETH

Considering the current market is range-bound, selling this call & put option enables us to earn premiums, leading to an impressive annual return of approximately 180%. Since the next FOMC meeting is in September, both options we are selling are expiring in one week’s time on 30th August. Here's the breakdown:

• Premium on Selling Call Option with Strike Price of $3,000: $24.9 per ETH
• Premium on Selling Put Option with Strike Price of $2,500: $73 per ETH
• Total Premium: $98
• Current ETH Price: $2,626
• Monthly Return on this trade: (98/2,626)*4= 14.9%
• Annualised Return: 14.9%*12= 179%

Should $ETH dip below our strike price, we’re more than happy to accumulate additional ETH at $2,3500. With the anticipated rate cuts in September, we foresee a rapid surge back to $2,700-$3,000 within just a few days post the rate cuts. If there's a rapid price surge and $ETH crosses $3,000, the overall market would likely trend bullish, driving all our open positions into profit, making the margin payment worthwhile. However, with no catalyst expected in the next week, a 14% jump in ETH's price within that timeframe seems unlikely.

LONG $SUNDOG

Entry Price- $0.049

Stop Loss- $0.10- To discuss

Take Profit 1- $0.25

Take Profit 2- $0.35

Take Profit 3- $0.50

We’ve already reached our first take profit target of $0.25 and we closed 50% of our position at $0.259 with a profit of over 429% in just four days. While we believe the token has the potential to surpass a $1B market cap, the market remains highly volatile. As our targets are met, we'll be taking our exits and closing the trade accordingly.

We've set a stop loss at $0.10 or a $100M market cap. If the token price falls below this level, we'll close our remaining position, still securing a 2x return on our open position.

Stay tuned for more updates and insights!

You can track all our trades here.

Now go grab a coffee and please DM for any questions. Keep in mind, this is NFA and DYOR.

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