Illiquid Bitcoin Options
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Yang Guo; Jiasun Li; Mei Luo; Yintian Wang
- Tsinghua University
- George Mason University
- ?George Mason University - Department of Finance
- ?Tsinghua University - School of Economics & Management
Strategy in a nutshell
Trade BTC options daily: go long illiquid (high RS) and short liquid (low RS) calls & puts. Portfolios volume-weighted and rebalanced daily. Only 10% of capital used due to high volatility.
Economic rationale
High bid-ask spreads in BTC options persist due to volatility, low liquidity, and market frictions. Exploiting illiquid-minus-liquid premia can yield returns for sophisticated traders.
Backtest performance
Annualised return186.15%
Volatility301.63%
Sharpe ratio0.62