Sep 14, 2020 at 11:18 UTC
Change in open interest on BTC options at Deribit (Chart: Skew) Against the Odds, Some Bitcoin Traders Are Betting on a $36K Price by Year’s End
The Deribit crypto derivatives exchange is seeing increasing investor interest in bitcoin options that would profit from prices rallying as high as $36,000 by the end of 2020.As of Sunday, call options at $36,000 and $32,000 strike prices expiring on Dec.25 were seeing the most daily positions opened.“We saw some out of the ordinary activity in the $36,000 December call,” Luuk Strijers, CCO of Deribit, told CoinDesk in a Telegram chat.“Few buyers with most likely bullish expectations executed these trades.” A call option gives the holder the right but not the obligation to buy the underlying asset at a predetermined price on or before a particular date.
A put option represents a right to sell.Open interest refers to the number of contracts traded, but not squared off with an offsetting position.BTC options: open interest change Source: Skew The most new open positions were seen in the $36,000 December call, with 752 contracts.
The number of open positions in the $32,000 call rose by 462 contracts.Relatively small additions were observed in the $28,000 December expiry call, as well as the $9,750 and $9,000 puts expiring this month.Buy positions in the out-of-the-money $36,000 and $32,000 calls were executed during Sunday’s European trading hours when the liquidity was low (wider bid-offer spread).As such, these traders paid significantly more in costs than they would have incurred on a weekday.The aggressive weekend trading is a little perplexing, given the options market sees a very low probability of prices reaching a new record high above $20,000 by the end of December.Option market probabilities Source: Skew The odds of bitcoin setting a new lifetime high over $20,000 by the year’s end are just 5%, the data suggests, while the likelihood of prices crossing $28,000 is 2%.Further, the market sees only a 9% chance of bitcoin crossing above $20,000 by the end of Q1 2021.While prospects of bitcoin rising to $36,000 are quite low, these deep out-of-the-money options are not expensive.
In other words, the maximum loss in this trade is limited to the extent of the price paid to buy the option.That may have motivated these weekend traders to take a long shot on a new ATH.
At press time, bitcoin is changing hands near $10,420.The cryptocurrency has been restricted mostly to a narrow range of $10,500 to $10,000 since Sept.
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