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Ok so on this feed I& #39;ve talked at length about:
Synth. cash position (swaps hedge) vs. synth bills (futures hedge)
Long/short futures curve
Calendar and Vertical option spreads
The merits of simply HODLing
But one position I haven& #39;t delved into, is secure borrow combos...
Synth. cash position (swaps hedge) vs. synth bills (futures hedge)
Long/short futures curve
Calendar and Vertical option spreads
The merits of simply HODLing
But one position I haven& #39;t delved into, is secure borrow combos...
I should charge a company in the space a few hundred bucks to write them a nice blog post, but, here& #39;s a mini-thread:
Borrow + buy synth. cash - Interest arb. Lenders charging Fed+1-4% make this viable.
Borrow + buy coin - simple margin spot deal with tighter liq. price.
Borrow + buy synth. cash - Interest arb. Lenders charging Fed+1-4% make this viable.
Borrow + buy coin - simple margin spot deal with tighter liq. price.
Borrow + spend - this is tantamount to opening a futures contract with the same expiration as the maturity of the loan at a premium with equal cost as the interest, and selling that amount of BTC.
Borrow BTC with USD collateral - great for arbing swaps/futures at discounts.
Borrow BTC with USD collateral - great for arbing swaps/futures at discounts.
Borrow + options - ok now we are talking:
Borrowed Covered Call - sell twice as many calls! Similar to buying a future with identical tenor/cost-of-capital and selling 1.8x calls.
Borrowed Calendar Collar - interesting, but also, similar to buying a Put Calendar 1.8x.
Borrowed Covered Call - sell twice as many calls! Similar to buying a future with identical tenor/cost-of-capital and selling 1.8x calls.
Borrowed Calendar Collar - interesting, but also, similar to buying a Put Calendar 1.8x.
My conclusion is that secured loans are good for spending, that& #39;s their unique selling point, or acquiring legacy assets that are less correlated, combined with collars so you have money to top-up the loan if the market drops. Otherwise, a future with an overly tight stop.
The other unique selling point of loans, ok, I could take 1 BTC, borrow 0.8 BTC worth of USD against it, take that 0.8 BTC and post it for a 2nd loan, and so on, until I& #39;m holding 5 BTC across my portfolio. Probably by ~4 in hock and 0.3 in loose margin, I go to the exchange then
use Option Portfolio Margin.
I take that small fraction of a coin and I put it into the debit end of a spread, or portfolio of spreads, I& #39;m short Theta now but get longer Theta from all the Call Calendars. Oooh, I can even beat the vig on the loans. Wowww. Amazing...
I take that small fraction of a coin and I put it into the debit end of a spread, or portfolio of spreads, I& #39;m short Theta now but get longer Theta from all the Call Calendars. Oooh, I can even beat the vig on the loans. Wowww. Amazing...
Calendars and Verticals (in some combo, they are good for opposite things, thus in combo, you have a bit of momo on your side, a bit of time on your side) are a form of leverage based on how cheap the IV is and also if you can scale into the spreads and get the debit lower.
A debit of 0.02 permits leverage of 50x
0.025 is 40x, 0.04 is 25x, 0.1 is 10x.
Most longest-term Calendars cost about 0.065 at IV ~100, for a 100% strike.
Portfolio margin also allows selling far OTM puts, long-dated ideally.
0.025 is 40x, 0.04 is 25x, 0.1 is 10x.
Most longest-term Calendars cost about 0.065 at IV ~100, for a 100% strike.
Portfolio margin also allows selling far OTM puts, long-dated ideally.
Instead of buying expensive Puts ATM to hedge your 4 BTC principal, you don& #39;t care much about it, the lenders have OTM puts at your 80% LTV threshold, let them deal with it. They& #39;ll just sell your coins anyway. No liquidation penalty? That& #39;s a volatility arb.
If you get ~0.115 for an 8 month Put that is 40% lower, you can sell 1.4x notional relative to the amount of BTC notional you have hedged at this level. So in this ex. you& #39;d sell 2.5 Puts, get 0.2825, reducing total debit to ~0.0165, hedge the 0.28 it& #39;s worth ~0.52 at strike.
So in the scenario that everything goes to holy heck, you are hurting, but not *so* badly. Your loans are toast, you& #39;re down slightly on premium, you& #39;re 5x short Puts, bud, it& #39;s not your day. But you don& #39;t necessarily get liquidated. So there& #39;s that.
In conclusion, I& #39;d probably not be a loan user myself unless it was to fund interest rate arb, either borrowing BTC to spot-short and buy swaps, or borrowing cash to buy synth. cash and beating the vig as the market rages.
Catalytically, N Bs on the sidelines for this is fuel.
Catalytically, N Bs on the sidelines for this is fuel.
