Subject: Re: What can Buffett be thinking? Ibit
I wouldn’t short anything in the crypto space, good luck.

You're probably right, but it didn't stop me from playing around with some numbers. For background, I've believed for a while that Bitcoin bounces around too much to be a good currency substitute. Some of that is backed up by people pouring investment money into Bitcoin, but mostly, it's backed up by looking at the price trendline. It just seems the chances of a up or down movement of 25% or 50% are really high.

Looking at IBIT options expiring December 31, 2025. If you believe Bitcoin could move up or down 50% in that time, you could buy a Call option on IBIT at $85, and a put option at $45. You'd make 5.59x your money on the Call option, or 12x your money on the Put option. Now because you bought them both, you 'd get half that, so 2.8x on your total investment if it gains 50% or more, 6x on your total investment if it loses 50% or more. What if it doesn't move that much from the current price? Well, you lose it all even if it moves 25% in one direction.

So let's look at a 25% movement either way. You could buy a Call at $66, and buy a Put at the same $66. You'd make 2.07X on the Call, or 2.48x on the Put, but because you're buying both investments, your real return is close to break even. Still, it sets you up for large return if Bitcoin does see a 50% positive (or negative) movement. This pair of options would give you 4X on the 50% increase, and 4.99x on the 50% decrease. Again, because you have to buy them both, that would be 2X, or 2.5X on your total investment. What if you don't see a movement this high? If this ETF that aims to track Bitcoin sees a 10% swing, the Call would trade at 0.83X your original investment, and the put would trade at 0.98X your original investment. Maybe that suggests you'd be able to bail on the trade closer to its expiration, maybe not.