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The price of Ethereum at $ 500 is closer than it appears based on altcoin options data

August 17, 2020

Open positions on Ether (ETH) futures rose 250% over the past three months to $ 1.7 billion. This incredible build came when the cryptocurrency broke the $ 400 resistance and hit its highest level in two years.

ETH futures open interest rates in USD

Open interest in ETH futures in USD. Source: Skew

The price of Ethereum at $ 500 is closer than it appears based on altcoin options dataThe price of Ethereum at $ 500 is closer than it appears based on altcoin options data

Unfortunately, There is no way to tell if futures contracts are primarily used for hedging or they are the result of increased leveraged bets on the $ 500 Ether price.

The only reliable information on this market is the base, namely the Compare the price of a futures contract with the cash price of the asset in the open market.

A positive base, also known as a “premium”, indicates a contango situation. (The asset’s spot price is lower than its future price), What can you expect in healthy markets?. This just shows that the sellers are asking for more money to postpone processing the transaction.

ETH 1-month futures on an annual basis

1 month ETH futures on an annual basis. Source: Skew

Currently, 1-month futures contracts are traded at an annualized premium of 20% indicates that buyers are betting that the spot price of Ether will rise.

The buy-sell ratio has become neutral

To measure how bullish professional traders are, we need to focus on the options markets. The two most common indicators used to evaluate bullish and bearish sentiment are the buy-sell relationship and the bias..

The buy-sell relationship consists of comparing the open positions of the put options with the call options. Call options are mainly used for neutral to bullish strategies, and the opposite is the case with put options.

Open interest put / call ratio of the ETH options

Open buy-sell ratio of ETH options. Source: Skew

Despite the signs of strong upward sentiment in the futures markets, the buy-sell relationship is in a neutral position, with the open interest call and put options practically balanced.

That’s a remarkable contrast to the 0.8 three months ago, which is indicative The turnover was 20% less than neutral and bullish call options.

The bias is also less bullish

To better interpret whether previous market sentiment is contaminating the buy-sell relationship, The current level of bias provides a real-time indicator of fear and greed based on the price of the options.

The bias indicators become negative when call options (neutral / bullish) are more expensive than equivalent sales. The indicator is usually between -20% and + 20% and reflects the current market regardless of the previous days or weeks of activity.

ETH 3-month options 25% delta offset

25% delta deviation for 3-month ETH options. Source: Skew

The graphic above shows how Professional traders became less optimistic after Ether finally broke the $ 400 resistance on Aug. 13.

Although the deviation (or inclination) still bullish, now back on last month’s level when ether traded sideways it was close to $ 240.

The options for September appear to be increasing

Less than forty days after the options expire on September 25th Markets should have a clearer idea of ​​what call and put options are all about right now.

Price of call options from September 25th. Source: Deribit

Multiply the open positions for each strike (base price) by the brand price (fair). it can be deduced what would presently create such a position.

There are currently 93,300 call options ranging from $ 340 to $ 880, expiring in September. Options with a higher strike or strike price have a lower brand price because their chances of winning are lower.

These options are currently valued at $ 4.4 million, even if The open positions amount to USD 40.1 million.

Open Interest gives every strike the same weight regardless of its market valueTherefore the use of (fair) brand prices provides better data.

September 25 put option prices

Put options price on September 25th. Source: Deribit

The 28,800 put options in the same range are currently valued at $ 940,000, significantly less than your own sales.

This indicates that The mood of professional traders is less optimistic as the price shows However, much less money is put into put options than into call options.

Under the options contracts, $ 500 seems feasible

An interesting outlook for these strike prices of $ 480 and up for September 25th is the number of call options of 53,700. At current prices, they are worth $ 1 million, which is 25% of the value of call options starting at $ 340..

From a derivatives trading perspective Not only does the $ 500 level seem feasible in 40 days, it is currently being supported by a large sum..

The premium of futures contracts has since confirmed these indicators Professional traders seem to be on the rise regardless of the recent spike of $ 440.

Ether seems to enjoy that positive dynamics through decentralized finances, oracles and the rapidly increasing use of decentralized stock exchanges.

When it comes to derivative indicators, the dips are meant to be bought.

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 should do your own research when making a decision.

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