Taking a long and short position on, say BTC, at the same time would be a crypto version of a straddle. If the price moved outside of the liquidation range, either up or down, then the losing position would be liquidated and the winning position could be closed at a profit. Unlike a traditional straddle where you can lose if there isn’t enough of a price move by the expiration date, using exchanges e.g. BTC3s and BTC3l, there’s no time limit on how long you can keep your position bouncing around. You only lose if the market moves to exactly your liquidation position, and then retraces.
But what about buying simultaneous longs and shorts not to straddle, but as a way of hedging the opening of a new swing trade with the anticipation of a limited volatility range (the boundaries of which would be your margin call prices) against an unknown initial price direction? You’re effectively paying double the spread (because you have 2 positions instead of 1) and adding a slight risk of liquidation for the privilege of not needing to know the direction the market will move, with the bet that it will remain volatile/swing tradable centred around your entry point within a given range (outside of which you may be liquidated, where this would fail and a straddle would be best).
TL;TR: Could simultaneous longs and shorts be used as a hedged swing trading strategy when you’re anticipating volatility within a given range, centred around the current price, while being unconfident about price direction?
The idea came to me today. Curious for thoughts.