Traders are celebrating the upcoming Bitcoin ETF, but options markets are less secure

The United States Securities and Exchange Commission (SEC) is expected to decide on October 18 whether to approve an application by asset manager ProShare Capital Management for an exchange-traded bitcoin fund (ETF).

As previously reported by Cointelegraph, the chairman of the SEC, Gary Gensler recently suggested that the regulator would be more likely to approve Bitcoin futures ETFs. indirect exposure under the Investment Companies Act of 1940.

October 15th, the Nasdaq Stock Market certified the registration of Valkyrie’s Bitcoin Strategy ETF shares for listing. The deadline for the SEC’s official approval of Valkyrie’s ETF filing is October 25, but could be extended to December 8.

$ 70,000 call options have an implied probability of 25%

Traders are celebrating the upcoming Bitcoin ETF, but options markets are less secure
Traders are celebrating the upcoming Bitcoin ETF, but options markets are less secure

Two weeks ago, finding an investor willing to bet on a price of $ 70,000 per Bitcoin (BTC) by October 29 would have been a daunting task. It needed a 62% increase from $ 43,100 on September 30, and that seemed far-fetched at the time. Therefore, call options of $ 70,000 per BTC traded on Deribit for $ 194, or 0.0045 BTC, on September 30th.

Purchase price of the Bitcoin options from October 29th in BTC. Source: Deribit

As shown above, the same option is currently trading at $ 1,570, or 0.0262 BTC, as Bitcoin is up 39% to $ 60,000 so far this month. So while there is still a long way to go to the $ 70,000 call option, odds have risen significantly.

Despite the rise in the BTC price the implied probability of the options (delta) is currently 25%, which may seem bearish at first glance.

Traders should not take option probabilities at face value

The price of the options largely depends on the distance to the expiration date. Given Bitcoin’s 4% daily volatility, anything can happen before the options expire on October 29th. Traders shouldn’t pay too much attention to the implied probability of options (the delta).

In order to better assess the chances of approval of the Bitcoin ETF by the end of the month, the $ 50,000 option delta should be used as the “base” scenario. Traders should assume that a 17% drop in price would be the definitive sign that the SEC’s decision will be delayed or rejected.

Given that the $ 50,000 call option trades with an 84% delta or an implied probability, investors are pricing in a 16% probability of a catastrophic scenario.

In the meantime, the $ 70,000 call option for October 29th at 8:00 AM UTC, indicating that the ETF has been approved, has an implied probability of 25%. Options markets undoubtedly show greater opportunities for positive move, but they are far from certain.

The views and opinions expressed here are solely those of author and do not necessarily reflect the views of Every investment and trade carries a risk, you must do your own research when making a decision.

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