How I size these post-shock adds...

A 15–20% crypto dump like we've seen recently usually triggers one of two emotions.

1. Panic: Get me the hell out!   

OR

2. Excitement:  Great, I can buy the dip again!

But a move like this, which doubled the implied vol almost overnight, is a beautiful opportunity if you know how to trade options.

When realized vol is exploding and the curve is inverted, spot is not the cleanest way to add risk.

Spot exposure forces you to eat the full path.

And the path is the problem, as many who were liquidated last week just found out.

In these volatility conditions, a bounce doesn’t just move price. It usually collapses implied vol. Spot/vol correlation is sky high.

If you add risk with spot, you’re long unprotected DELTA and you're not taking advantage of conditional probability.  

So the constraint I use is simple: if I want to add upside after a shock, I want a structure that has a small premium outlay and gets short VEGA if we bounce.  

That’s why, in these conditions, I’d rather express “buy the dip” through call ratios than through naked spot.

If we rally, I’m often getting taken short vol on the upside, and that reset can do a lot of the work. If we don’t rally, my downside is defined by design, not by hope.

The trade will take time to grow into it's Greeks but we're not here for instant gratification. We are here for ALPHA.

I shared this structure with the community last week when most people on crypto Twitter were losing their minds.

Since then, spot has bounced over 10% and implied vol is marginally lower.  We let it bake!