Bitcoin Options Trading in a Low-Volatility Regime: Capitalizing on Short Strangle Strategies with September 2025 Expiry

Bitcoin’s September 2025 options market is currently in a low-volatility regime, presenting a compelling case for short strangle strategies. With implied volatility (IV) at 32% as of August 26, 2025, the market is pricing in significantly less movement than the one-year average of 50% [4]. This disconnect between IV and realized volatility (RV)—which has historically traded below 25% in recent months [5]—suggests that options are overpriced, creating an opportunity for traders to sell premium.

Market Dynamics Favor Short Strangles

The short strangle strategy, which involves selling out-of-the-money (OTM) put and call options, thrives in environments where price action remains confined. For September 2025, 10x Research recommends targeting strike prices around $95,000 (put) and $125,000 (call), based on the expectation that Bitcoin will trade within this range [4]. This is supported by the tightening 30-day price range, which has compressed to its lowest level in two years [5], and a put/call ratio of 0.79, indicating strong demand for puts as hedging tools [5].

The implied volatility term structure further reinforces this setup. The IV curve for September 2025 is trading above RV, signaling that options are being priced for a calm market [4]. In such conditions, short strangles allow traders to collect premiums while benefiting from time decay, as the probability of a large price move diminishes.

Risk-Reward Profile in a Stable Regime

While short strangles are inherently high-risk due to unlimited loss potential on the call side and significant downside risk on the put side [2], the current environment mitigates these concerns. Historical data from mid-2025 shows that institutional traders successfully executed short strangles on Bitcoin and Ethereum during similar low-volatility periods, capitalizing on tight ranges and overpriced options [3]. A prior short strangle in August 2025 with strikes at $105,000 and $130,000 yielded a 3.5% return, demonstrating the strategy’s viability [1].

However, risks persist. A surge in the Deribit Volatility Index (DVOL) from 26% to 37% in late August 2025 [6] highlights the potential for sudden volatility spikes, particularly if macroeconomic events—such as U.S. tariff announcements—disrupt the status quo. Traders must monitor DVOL and adjust positions accordingly.

Historical Context and Strategic Rationale

Bitcoin’s volatility has systematically declined over time, driven by maturing infrastructure and deeper liquidity [6]. February 2025 marked a historic low in realized volatility (29%) [6], underscoring the asset’s evolving risk profile. Tsuji’s 2025 study on Bitcoin’s risk-return trade-off further validates the strategy, showing positive returns in low-volatility regimes using Markov switching models [4]. This aligns with the current market setup, where the risk-reward asymmetry favors short strangles.

Conclusion

For traders seeking income generation in a stable Bitcoin environment, the September 2025 short strangle offers a compelling case. By selling OTM options within a defined range, traders can capitalize on overpriced volatility while managing directional risk. However, vigilance is required to navigate potential volatility shocks. As the market balances supply and demand, the coiled-spring effect—where liquidity clusters around key levels—could either reward patience or punish complacency.

Source:
[1] Bitcoin 'Short Strangle' Preferred as Market Signals Near-Term Calm [https://www.coindesk.com/markets/2025/08/29/bitcoin-short-strangle-preferred-as-market-signals-near-term-calm-10x-research]
[2] Short Strangle Options Strategy: Beginner's Guide [https://tradingblock.com/strategies/short-strangle]
[3] Last Week on PowerTrade: Crypto Options Trends & Key Highlights [https://medium.datadriveninvestor.com/last-week-on-powertrade-crypto-options-trends-key-highlights-week-of-june-30-july-6-2025-990495165295]
[4] The risk–return trade-off of Bitcoin: Evidence from regime-switching analysis [https://fbj.springeropen.com/articles/10.1186/s43093-025-00551-5]
[5] Bitcoin Volatility Hits 2-Year Low As 30-Day Range Tightens [https://www.mitrade.com/insights/news/live-news/article-3-1040477-20250815]
[6] BTC Volatility Wakes Up Signaling Calm Before the Storm [https://www.coindesk.com/markets/2025/08/11/calm-before-the-storm-expected-as-bitcoin-volatility-wakes-up]