The error:Thinking high IV means bullish or bearish.
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Reality:IV is about magnitude of movement, not direction. High IV = expensive options.
Timeline
What Happened
Before event
IV spikes to 100%
Your thought
"High IV = bullish!" → Buy calls
Event passes
IV drops to 60% (vol crush)
BTC price
Flat, didn't move
Your calls
Lose value despite being "right"
💡
Fix
Separate your vol view from your directional view. If you're buying options, you're implicitly long IV. If IV drops, you lose even if direction was correct.
The error:Assuming you can exit a position at a fair price whenever you want.
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Reality:Options order books are thin. The book that looked deep when you entered may vanish when you need to exit, especially during the moves when you most need out.
Scenario
Value
You buy 10 BTC puts
Spread: $50 (tight)
BTC drops 8%
Your puts are now profitable
You try to sell 10 puts
Spread: $400 (wide)
Only 2 showing on bid
Rest need to be walked down
Effective slippage
~5% of position value lost
💡
Fix
Entry is easy; exit is hard. Always check depth, not just the top-of-book spread. Size positions to what you can exit in a stressed market, not a calm one.
The error:Holding positions through expiry without considering open interest at nearby strikes.
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Reality:Large open interest at round strikes (BTC $100K, ETH $4K) creates a gravitational pull. Market makers' gamma hedging activity pins spot to these strikes as expiry approaches.
When large open interest is concentrated at a strike, especially if static hedgers such as covered call sellers hold it, dynamic hedgers who are long gamma buy below the strike and sell above it, creating an "absorbing state." The strike acts as a magnet.
💡
Fix
Check the open interest heat map before expiry. If a massive strike is nearby, expect the market to gravitate toward it. Don't fight the pin, trade around it.
The error:Believing that buying an option limits your total loss to the premium paid.
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Reality:If you delta-hedge or adjust/roll a long option, cumulative hedge losses can exceed the original premium. Even without hedging, rolling a losing position accumulates costs beyond the initial premium.
Day
What Happened
Cumulative P&L
0
Buy call, premium = $1,000
-$1,000
5
BTC rises 3%, delta-hedge by selling spot
-$1,000
10
BTC rises another 2%, sell more spot
-$1,000
15
BTC drops 6%, buy back spot at higher prices
-$1,800
20
BTC drops 3% more, buy more spot
-$2,400
30
Option expires worthless. Hedge losses realized.
-$2,400 (2.4x premium)
💡
Fix
If you're delta-hedging, your max loss is NOT the premium. Track total P&L including hedge costs. In trending markets, hedge "whipsaw" can be brutal.