IBIT Options Trading Recap!

Today marks the historic Day 1 of BTC ETF options launch. It did not disappoint, with over $1.86Bn in notional traded! There were some notable takeaways in my opinion, so here is a quick thread on the Top 10 Most Interesting Observations I made 👇 1/ Just as we expected, the market launched with a beautiful “volatility smile” quickly established by 945AM and for the rest of the day. In fact, the smile got even wider throughout the day, finishing with higher wings by EoD.

Here’s the untold truth about covered call strategies:

Often misrepresented as “income” plays, they’re actually short-volatility strategies crafted to lower the cost basis of your long position. But it’s not about blindly selling weekly calls. Success depends on timing key dates (e.g., Dec 13, Nasdaq inclusion) and understanding whether you’re in sticky-delta or sticky-spot regimes.

With the right strategy, you could potentially acquire $MSTR shares at no net cost within a year. Follow my posts here and on Substack, and I’ll guide you through the process. This is one of the most important frameworks to master, best studied by the legendary @EmanuelDerman:

If you’re bookmarking one investment guide for the decades to come, make it this one. Five minutes to rewire your mindset—and you’ll never see investing the same again. Revisit after the election; it’ll hit even harder.

Here’s the grand finale: Part III: The Radical Portfolio

1/ The Radical Portfolio’s core thesis is 60% Compliance / 40% Resistance.

To illustrate what this radical mindset means, we assess the foundational assumptions of different kinds of assets in the world that one can own as we seek to draw some heuristics out of their commonalities. Here I lay out how to categorize a few examples in such a schema:
• If you own GLD (Gold ETF), that’s compliance - 60% bucket. If you own physical gold bars, that’s resistance - 40% bucket
• If you hang valuable art on your walls at your home, that’s compliance - 60% bucket. If you own the same art held in tax-free freeports, that’s resistance - 40% bucket
• If you own your primary residence, that’s compliance - 60% bucket. If you anonymously own a shelter offshore, that’s resistance - 40% bucket

What you find here is that at a high level, highly resistant assets are by definition likely to share attributes of being decentralized, scarce, and timeless. This is the radical way we must imagine portfolio theory. We must live our lives within institutions for the most part (60%), but we also need to live our private lives away from such institutions for it is not improbable that they may break during our lifetime, most likely in a fantastic way.

1/ Incredible episode on the inner workings of multi-strategy funds. @TheStalwart, @tracyalloway, and Dan offered plenty of valuable insights (thank you!), but I believe they overlooked some of the most crucial aspects. Here are a few thoughts to add to the conversation:

https://twitter.com/TheStalwart/status/1843223330989776987

2/ ‘Being a multi-strategy fund is a way of organizing yourself. It is not an investment strategy.’ - Fantastic quote from Dan, and I agree.

I’ve mentioned before that Millennium is like an iOS—an investment operating system. 👇

https://x.com/dgt10011/status/1796223813770006913

Why Citadel Dropped Its Plan to Become a Primary Dealer

1/ Citadel unexpectedly shelved its long-standing ambition to become a Primary Dealer (PD), a key status in the world of broker-dealers. This move highlights broader changes in the Treasury’s liquidity model. 2/ Traditionally, being a PD was the ultimate privilege for broker-dealers—direct trading with the Federal Reserve and access to U.S. Treasuries at auction. Citadel chased this status for over a decade, even filing an RFI on the evolution of the Treasury market.

Clear eyes from @CryptoHayes and the imagined "Central Bank Currency Swap" to transmit stronger JPY without US asset dispositions. Read details here:

For those uninitiated into the fantastic world of central banks and read his post for the first time, you may think that this is all "too magic to be true." So I thought I would share some historical examples of how swap lines have been used to save markets in the past: 🧵cryptohayes.medium.com/spirited-away-… Bretton Woods era (1940s-1970s)

In the 1960s, The Fed established reciprocal currency swaps with BoE, Budesbank, Bank of France, Italy, etc. to defend their respective fx pegs. It estimated that it reached as high as $8bn in swaps (which might be around $70bn today). The accumulation of dollars abroad put pressure on US gold reserves.

Then in the 70s, the Smithsonian Agreement was struck to allow Fed, Bundesbank, BoJ to intervene in FX markets and use swap lines to unsuccessfully maintain parities after the suspension of the gold convertibility, ultimately leading to its collapse and free float thereafter.

My colleague @Matt_Hougan writes an excellent weekly memo, where he recently advocated for the consideration of $ETH as a technology investment akin to high growth tech plays like $NVDA and $FB.

This was the very last sentence of the memo. What does that actually look like? 👇 The 90/10 mix of Nasdaq and Ethereum with monthly rebalance indeed generates a higher simplified Sharpe ratio across various time series. Just like $BTC adds value to a 60/40 portfolio, $ETH adds value to a modern technology portfolio. The 1-year total return chart shows you how.