The key takeaways
- The open interest in Bitcoin options is half of $6 billion. This includes long-shot strategies for neutral pricing and hedging.
- This premium of 9% on put options (sells) indicates that traders are concerned about the potential Bitcoin price dropping.
The Bitcoin bulls are optimistic about the options that expire on Dec. 25. There is $6 billion in stake. A 33% increase in price since the low of $60,130 on February 6 has played an important role in reinforcing bullish expectation. But the large number of buy call options that are targeting at least $115,000 for December 25 makes one wonder if bulls have become overconfident.
Deribit BTC is now accepting interest in December Bitcoin Call (Buy) Options. Source: Deribit
Deribit holds 92% of the market in open interest for Bitcoin options at $5.5 Billion. The value of the options at expiry is likely to be significantly lower. Most of these instruments have been placed as a hedge against unlikely events or to support neutral strategies which don’t require big price changes in order to stay profitable.
Bitcoin Call Options dominate but both sides make unrealistic bets
Deribit’s call option market is 56% larger than that of put (sell) orders. Put-to-call is a skewed ratio because cryptocurrency traders tend to be bullish. Even so, $1.85 Billion is a significant amount of open interest on call options that target $115,000 or more. It is worth looking at the difference between call and put options in this setup.
Deribit BTC is currently taking interest in December Bitcoin Put (Sell) Options. Source: Deribit
Open interest of $1 billion is notable for the volume put options that target $55,000 or less. The percentage of bets deemed improbable for each side is roughly equal, at around 50%. The bears will appear as equally optimistic if bulls are viewed as being overly confident. extreme in their pessimism.
Deribit to announce the pricing of Bitcoin December options at its May 7th event Source: Deribit
Call options at $120,000 offer cheap exposure to major upsides. According to Deribit’s prices for May 7, the buyer would pay $2,202 in order to gain unlimited exposure up to one full percentage point. Bitcoin At a Price of $120,000 Or More on Dec. 25,
This metric gives a more accurate picture of the comfort level that professional traders have with both price upsides and downsides.
Related: Bitcoin holds $81K amid flat derivatives markets–Is rally sustainable?
Bitcoin 6-month options delta skew (put-call) at Deribit: Source: Laevitas
Put options trade at a premium of 9% compared to calls equivalents, signaling a moderate fear for Bitcoin’s price movement downward. The skew should be between -6 and +6 under neutral conditions. The rally up to $80,000 did not have a significant impact on investor confidence, according to derivatives metrics.
The $1.85bn in call options for December should not be seen as an indication of excessive confidence.
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Source: cointelegraph.com
