How to make $200K trading MOVE Contracts

This newsletter will show you how to profit from a hidden gem in the trading world. It is a new trading instrument available recently in FTX called MOVE Contracts.

What are MOVE contracts?

MOVE contracts are a unique derivative offered on the trading platform known asFTX. In contrast to futures contracts, MOVE contracts reflect the absolute change of Bitcoin’s price over a time before the contract expiration date.The advantage of move contracts is that they offer a high degree of leverage, up to 100x. This means that they can be used to make big profits from even small price movements.In this article, we’ll take a closer look at how MOVE contracts and how they can be used to generate a steady source of profits.

Backtesting strategy for move contracts on FTX

I have done my own backtesting using a Python script to compute these trades since January 2020, by collecting the historical data and applying a simple strategy allowed me you to see how the strategy would have performed in different market conditions. If you’re thinking of trading move contracts, then backtesting your strategy first is a sensible precaution.

The results are quite impressive:

Backtest Results

👉 Total: 968 trades

✅ 536 wins

❌ 432 losses

👊 Strike rate: 55%

🥺 Start Account: $10,000

🤩 End Account: $279,813

🤨 Min: $10,000

😳 Max: $304,746

😱 Max drawdown: 22.18%

🥳 Final P&L: $269,813 (2698%)

Things to know about MOVE contracts

There are different types of MOVE contracts, each with their own distinct features. Here is a quick rundown of the most common MOVE contract types:There are three types of MOVE contracts.Daily MOVE contracts expire to the move of BTC over a single day’s period. Their ticker is [underlying]-MOVE-[expiration date]; e.g. BTC-MOVE-1116 is the BTC MOVE contract expiring at the end of November 16th UTC.Weekly MOVE contracts expire to the move of BTC over a 7 day period. Their ticker is [underlying]-MOVE-WK-[expiration date]; e.g. BTC-MOVE-WK-1122 expires to the amount that BTC moves between the start of November 16th and the end of November 22nd.Quarterly MOVE contracts expire to the move of BTC over a roughly 3 month. Their ticker is [underlying]-MOVE-[expiration year]Q[quarter number]; e.g. BTC-MOVE-2020Q2 expires to the amount that BTC moves during Q2 2020, from March 27th 2020 to June 25th 2020.

How does MOVE relate to options and volatility?

MOVE contracts are straddles with a strike price equal to the TWAP of the first hour of their expiration period and underlying expiration price equal to the TWAP of the last hour of their expiration period.The more volatile a product is, the higher its expected move. If you assume that products follow a Gaussian distribution then the expected value of the absolute value of a product’s move should be sqrt(2/pi) times the product’s daily volatility (or weekly volatility for weekly MOVE contracts). This means that daily MOVE contracts should be worth roughly 80% of the product’s daily volatility.

Calculations

To calculate an implied volatility from a MOVE contract, you can do the following:a) PUT = [STRADDLE + STRIKE - FUTURE] / 2; the straddle price is the MOVE price, the strike price is on the MOVE market page, and the futures price is the price of a bitcoin future expiring around the same time as the MOVE contract. Note that this is only approximate, and doesn’t perfectly handle interest rates and other effects.b) Use an online implied volatility calculator, plugging in the implied put price based on (a) for the Market Price.

The profitable trading strategy

Profit by shorting FTX MOVE contract 

Profiting from shorting a MOVE contract is most easily accomplished by betting on volatility returns. For instance, BTC fluctuates between $21,000 and $20,000 throughout the day.

You anticipate the price returning to $21,000 or a little higher. You may short MOVE with the expectation that the BTC price would return to the level at where the daily candle started.

Profiting from volatility callback is the purpose of this strategy.If are interested in the particulars of the execution of these trades let me know in the comments section.

Disclaimer:Non of the above is financial advise. I am not a financial advisor. Do not take anything on Twitter as financial advice, ever. Do your own research. Consult a professional investment advisor before making any investment decisions!