The Crypto Turn-Of-The-Month Trade (Patreon)

I'm working on a video about Optionsellers.com.

Does this face ring a bell?

If not, I'd highly recommend watching this video. 

It's up there with GUH as one of the great meme moments in all of internet stonk history. 

It's funny that he didn't think: 

Maybe the giant Rolex isn't the best choice as I discuss how I just lost 150 million of your dollars?  

Crypto End of Month Trade

I found out about this trade from Quant Arb. I'd highly recommend checking out his Substack if you like quant stuff. I've been a subscriber for a while. 

Most of it is above my 4th grade reading level, but there is massive alpha there for anyone willing to put in enough effort to get it.

Below are the returns of a strategy that buys Bitcoin the last ~3 days of the month, and a strategy that buys Bitcoin the last ~4 days of the month. 

As you can see, we definitely have lines going up. They seem to be a pretty smooth lines as well. This is good. 

Interestingly it started to work around the middle of 2020 for some reason. I'm not sure why this is the case? 

                              Bitcoin returns bucketed by day of month

Here we have BTC returns grouped by day of month. 

We can definitely see that it consistently tends to go up in the last few days of the month. The rest of the days appear more or less random. 

I wanted to see if this effect was present in any crypto ETFs. From an opportunity cost perspective, I'd rather not hold money in Coinbase for a trade that only has a position a few days per month (despite the returns being fuken good).

BITO is an ETF that uses futures to replicate the return of spot Bitcoin. 

We can see this effect exists in the ETF, but to a lesser extent.

I also ran a ff5 regression on the strategy in BITO to see if the returns could be explained by different factors. 

Basically taking a few common metrics that explain how stonks move (size, value, etc) and seeing if they explain the ups and downs of our strategy. 

Mkt- Rf is our market factor. We can see it's statistically significant. 

This is a problem, because it means the end-of-month returns of BITO can be explained by the returns of the market.

Whenever the market was up at the end of the month, our strategy was up.

Whenever the market was down at the end of the month, our strategy was down. 

I decided to solve this problem by not caring and doing the trade anyway. 

After all, because I was lazy I did this regression against the returns of the ETF, not the returns of Bitcoin (and as we saw those two don't track very well).

Because Bitcoin trades every day and the stonk market is open like 5 days a week or something, the data is asynchronous, which means you get shafted trying to do any analysis. 

BITO also doesn't have that much historical data so I'm just gonna tell myself my sample size was too small. 

I went on to look for this effect in Ethereum, and that was all the confirmation bias I needed to ensure myself this was a good trade. 

                                  Long last 5 days of the month in Ethereum 

Interestingly, you'll notice the strategy started working in Bitcoin and Eth right around the same time. 

I'm guessing there is a good reason why? 

Implementation 

Buy bitcoin or eth the last 3-5 days of the month and sell it around the beginning of the month or something. 

Earnings Season Begins

I started documenting all the earnings trades I took at the end of last earnings season to post on here for you guys. 

As soon as I started documenting it, it started going terrifyingly well. I know this lucky streak isn't going to continue. 

Let me know if there are any other metrics you want me to track on the above spreadsheet.

I didn't take any earnings trades last week as I just got back from South America and was deathly sick.

Ironically, it wasn't even from South America. It was from the layover in Miami on the journey home. 

Flight delayed until the morning? Let's get a hotel in South Beach and go out before our 11am flight!

You know how that ends. 

However now I'm more or less healthy and ready to jump into the big upcoming earnings week. 

These short volatility ETNs are literally free money. Tempted to just degen the whole portfolio into them for a few months......