Options Market Shows Call Bias as Bitcoin Prepares for New Price High
Bitcoin's call options are drawing higher value than puts.
Apr 1, 2021 at 10:12 a.m. UTCUpdated Sep 14, 2021 at 12:34 p.m. UTC
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Bullishness looks to be building in the bitcoin options listed on the dominant Deribit exchange, with the cryptocurrency trading just 4.6% short of a new record high.
- Options skew, which measures the difference between the call implied volatility and put implied volatility for all options, is creeping up, as tweeted by the options analytics platform Genesis Volatility.
- In plain English, that means call options are again drawing greater demand or premium than puts in a sign of bullish bias.
- Implied volatility refers to investors' expectations for price turbulence over a specific period and positively impacts the option's price. Hence, an uptick in the call-put implied volatility spread is considered a sign of bullish positioning.
- A call option gives the purchaser the right but not the obligation to buy the underlying asset at a predetermined price on or before a specific date. A put option gives the buyer the right to sell.
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- Both short- and long-term skews are ticking higher. The call bias had weakened in the second half of March, with bitcoin witnessing a healthy bull market correction from the record high of $61,557 to $50,400.
- Bitcoin is currently trading near $59,800 at press time, representing a 5.6% gain on the week, as per CoinDesk 20 data.
- According to Swiss-based options analytics firm Laevitas, "fireworks will ensue" once the psychological resistance of $60,000 is breached.
- Traders are positioning for a solid rally in the short term via deep out-of-the-money calls such as the one at $80,000.
- At press time, the total open interest in the $80,000 call option is more than 5,000 contracts, the highest among options listed on Deribit with an April 30 expiry.
- Some analysts say the daily chart flag breakout – a bullish chart pattern – has opened the doors for a rally to at least $70,000 in the next few weeks. The flag pattern, however, is disputed, as discussed Wednesday.
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