Ether (ETH) has risen by more than 17% since the beginning of the week, and the increases appear to be linked to the increasing use of stable coins and the increase in DeFi applications.
As reported by Cointelegraph, The use of the Ethereum network exceeded Bitcoin. Doubling of the volume determined in the course of 2019.
Another possibly bullish factor behind it, is the final Ethereum 2.0 test network scheduled for August 4th. This seems to have put investors in a good mood, despite the current rise in gas commissions. Investors rushed to the options markets last week. to send Ether’s open interest to a record $ 230 million.
Open interest in ETH options. Source: Skew
As strange as it sounds Some of these options reached an impressive price of USD 720 by December 25. This is pretty optimistic as it shows a 160% increase.
6,000 of these call options were traded today, and a further 6,000 call options were traded on September 25. with prices from USD 400 to USD 880. These operations more than added USD 3.2 million in open positions.
An ether with a maturity of more than 400 USF seems unlikely
What are the odds for current bets based on the Black Scholes option pricing model? The Deribit exchange presents this information as a “delta”. These are the percentage probabilities for each price, taking into account the current implied volatility.
Delta of ETH options from December 25th. Source: Deribit
According to the previous data, The $ 400 price for December has a 34% chance. during the most negotiated price of USD 720 has a very low probability of 11%, depending on the option pricing model.
That’s why, The price paid for each USD 720 contract was 0.025 ether. The 6,050 options traded today have only cost buyers USD 42,000. but increased open interest in $ 1.7 million.
The end of September has even fewer options
With just over two months to the September due date The optimism rates of $ 400 per ETH for traders are less likely.
ETH Options Delta from September 25th. Source: Deribit
The same $ 400 price now offers an 18% chance, according to the Black Scholes pricing model. while the amazing $ 720 expiration is only 3%.
As shown above Options for the term in September are traded at 0.03 ETH each. Therefore, they shouldn’t have the same weight as the more modest, optimistic prices.
Selling and buying relationships can be misleading
Investors should pay less attention to open interest holders of options that reach an all-time high and focus more on the prices paid for such options. These unlikely prices above $ 400 also affect the indicators, including the sell / buy ratio.
Selling / buying relationship in ETH options. Source: Skew
On July 22, the open sales / purchase share of ETH was 0.84, which favored the call options by 16%. Despite the optimistic reading, this number could have been increased by OTM options (buy-out-of-money), which offers little chance.
The futures markets offer better indicators
A better way to measure the appetite of professional investors is Contango. This includes measuring the premium for longer term future contracts against the current price of ether (ETH).
Annualized ETH futures basis. Source: Skew
Such an indicator, also known as a base, recently achieved an impressive annual rate of 12%. Persistent periods over 10% are not very common, and they last saw each other on March 8th. just before Ether started a major correction on Bloody Monday when Bitcoin fell below $ 8,000.
Despite all the odds, the cops could do something
Is the burgeoning DeFi industry overly optimistic that investors are aggressively buying call options with relatively low odds?
Most likely yes However, there is currently no way to determine if terms over $ 400 for September and December are off the table.
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