Open positions for options from Ethereum (ETH) have increased fivefold in the past three months, reaching $ 337 million.
Although this figure is very pale compared to the current $ 1.8 billion market for bitcoin options (BTC). Ether options grew to the same size as the BTC options market about 15 months ago.
Open open interest in Ethereum options in USD. Source: Skew
The options are divided into two parts Basic instruments: Call options, primarily aimed at bullish strategies, and put options, primarily used in bearish operations.
This is a very simple overview, but it does provide an overview of what professional traders expect. because big trades put more strain on the index.
Sell / buy relationship of open interest in ETH options. Source: Skew
This sales / purchase ratio reached 0.37 in mid-March, This shows that the open positions for put options (bearish) were 63% lower than for call options (bullish). All of that changed after the cryptocurrency market crashed on March 12th, when the price of ether plunged more than 40%.
Traders began to build protective positions at an impressive rate, and the sell / buy ratio hit 1.04 in early June, indicating this Put options had a higher open interest than call options.
How Ether (ETH) failed to break the $ 250 level. The open interest decreased somewhat to 0.84 in mid-July.
Interestingly, despite the recent 64% rally to the current $ 390 since July 20th, The options markets continue to add more bearish put options. This indicator should not be analyzed independently. as these options could be worth a dime if your odds are considered low.
Prices above $ 400 are not common
Another widely used indicator It is the comparison of open interest above and below the current market level.
To reduce the impact of the USD 400 maturity concentration, Open interest should be analyzed 6% below the current price of $ 390 for Ether and 6% above excluding these levels.
Open interest in options by price (thousands). Source: Skew
There are currently 530,000 ETH options under the expiry of USD 370. compared to 280,000 ETH options priced above $ 400. This shows 65% of the option prices regardless of the call or put options below the current market level.
Such an indicator could show this Most traders didn’t expect such a strong move. although this is absolutely necessary This does not lead to a downward trend.
With enough time More trades should have maturities in excess of $ 400, and this relationship could cancel out.
Not all indicators are bearish
Option bias measures how much more expensive call options are compared to put options with a similar risk. A practical approach to measurement compares the price of a call option 10% above the underlying futures benchmark with a put option 10% below.
In a neutral market The marked (fair) price for both should be very similar. If the purchase option is more expensive, indicates that market makers are charging more money for upside protection.
This is a bullish signal While the opposite is the case with a more expensive put option, it represents a downtrend.
Ether (ETH) options for Deribit will expire on September 25th. Source: Deribit
On the 8th of August The ETH markets compared to the underlying September futures of USD 400 signal optimism. Up Protection (Call Options) 10% above Trade at 0.082 ETH during downside protection (put options) at 0.0693 ETH, i.e. 15.5% cheaper.
This is undoubtedly a bullish indicator and shouldn’t be affected by recent price changes. because market makers are constantly re-evaluating bids and offers based on volatility and market conditions.
Futures contracts also favor bulls
The main indicator of a futures contract is the base level. This is measured Comparison of the 1- and 3-month contracts with the current spot rate.
A healthy market should show a contango situation with traded futures with an annualized premium of 5% or more.
Bear markets will show a neutral base below 5% annualized or worse in a situation known as “Backwardation” as the base becomes negative.
Annualized basis of 1-month ETH futures. Source: Skew
Currently, the annualized basis of the ETH futures has held its level above 10% for the past two weeks. This suggests a very bullish tone from a futures trading perspective.
It should be noted that the current contango of 20% This could indicate excessive leverage by buyers, but it is not necessarily dangerous. If most of your leveraged futures positions were created below the current price level, Buyers are comfortable enough to pay the high maintenance costs.
Past performance is no guarantee of future results
Lots of traders for technical analysis You only analyze daily and weekly charts to get information about an asset’s future opportunities. but that creates an incomplete view of the financial position.
Monitor how market makers are currently evaluating options markets and the premium status of current futures contracts seems like a better way to gauge the sentiment of professional traders.
Both options, the sell / buy ratio and the amount held at each price level, appear to be contaminated by amounts that occurred more than two weeks ago than Ether traded under $ 300.
Currently, trading data on the options and futures markets indicate a strong upward trend from professional traders. This is a good sign that the resistance at USD 400 could break in the coming weeks.
The views and opinions expressed here are solely those of author and do not necessarily reflect the views of Cointelegraph. Every investment and trade movement is associated with risks. You must do your own research when making a decision.