Bitcoin

$ 32,000 worth of bitcoin options show that some professional traders expect other benefits

A month ago it was difficult to find an investor who was expecting Bitcoin (BTC) to reach $ 32,000 by January. At that point, it needed a 140% price hike of $ 13,300 by October 30, which seemed pretty implausible.

So, The call option at $ 32,000 for each January BTC traded on Deribit for a meager $ 67 or 0.005 BTC in late October.

According to Coinmarketcap, Bitcoin’s market capitalization is currently $ 329,291,304,451.

Option to buy BTC for $ 32,000 in January 2021. Source: Deribit
$ 32,000 worth of bitcoin options show that some professional traders expect other benefits
$ 32,000 worth of bitcoin options show that some professional traders expect other benefits

The same calling option peaked at $ 705. It’s a nearly 10x gain in less than four weeks. It should be mentioned that Despite rising to $ 19,484, it takes another 67% to reach $ 32,000.

BTC call options market in January 2021. Source: Deribit

Despite the recent price hike in Bitcoin, the implied probability of options (delta) is currently 11%. This call option price has also increased due to the changing volatility of BTC as sellers will charge a higher premium for taking risks in uncertain markets..

Strong price fluctuations, regardless of the direction, lead to an increase in volatility and In the event of unexpected news, the indicator usually rises.

3 month bitcoin options imply volatility. Source: Skew

It should be noted how BTC volatility rose from 57% on October 30th to 78% this week. This event is particularly bullish for those buying call options. Even If the Bitcoin price had stayed the same, the option price would have increased accordingly.

The odds of the options should not be taken literally

The price of the options also depends heavily on how far away the expiration date is. The same call option at $ 32,000 could be considered worthless two days prior to expiration. Therefore, traders shouldn’t pay too much attention to the implied probability of options (delta).

BTC call options market in December 2020. Source: Deribit

When an investor looks at the December 25 call options, they can conclude that the 26% probability for $ 20,000 does not seem convincing. After all, pumping 18% per month doesn’t seem to make sense. Traders tend to have short term memories, however In 9 of the last 12 months, there was an 18% increase in 18 days.

Price of Bitcoin (USD) in Bitstamp. Source: TradingView

The last time there was a monthly pumping of 18% or more was not long ago. On August 23, Bitcoin closed at $ 11,645, up 22% from the previous month..

Traders and investors should consider buying call options with longer expiration dates. Those who had the courage a month ago to bet on the 150% increase in the price of Bitcoin are very pleased with the results.

The views, thoughts and opinions expressed here are solely those of darer and do not necessarily reflect or represent the views and opinions of Cointelegraph. Every investment and trade movement is associated with risks. You must do your own research when making a decision.

Don’t stop reading:

Similar Posts