Something Bitcoin Options traders are making fancy bets, betting on a six-digit price rally by the end of the year, though the cryptocurrency continues to struggle after falling 35% last month.
The dominant cryptocurrency options exchange, Deribit, recorded a total of 425, according to Laevitas Bitcoin Call option contracts with an exercise price of $ 200,000 and an expiration date of December 31st change hands on Thursday. This strike price is approximately five times the current level.
A call option is a derivative contract that gives the buyer the right, but not the obligation, to buy the underlying asset at a predetermined price on or before a certain date. In theory, buying a call to the $ 200,000 strike that expires on December 31 is a bet that the cryptocurrency will end the year above that level.
While the trade size is relatively small compared to similar games of chance which CoinDesk has covered In the past, bets are still interesting for a number of reasons. First of all, the $ 200,000 call options are a long-term bet with a full six months expiration date away.
And because the options are so far out of the money (spike well above the spot market price), they are extremely cheap and are currently trading at 0.018 BTC ($ 698) on Deribit.
This turns the options into a lottery ticket: buyers will only lose $ 698 per lot if the market doesn’t rise by December 31st. But the option would, in theory, appreciate significantly in value once upside sentiment returned to the market.
Such low risk games of chance are often seen on bull runs. For example dealers piled up the $ 80,000 call option in March when Bitcoin was on a strong uptrend, trading at highs above $ 50,000.
Bitcoin soared to an all-time high of nearly $ 65,000 in April, but the price has since fallen and now appears to be consolidating below $ 40,000. At the time of going to press, the largest cryptocurrency changed hands at around $ 37,500.
Lately the market has been filled with doom and darkness. However, of all the options listed on Deribit, the most popular is the $ 100,000 call with an expiring open interest of 9,000.
The diagram also shows a small build-up of open interest on the $ 300,000 and $ 400,000 calls.
By and large, however, the options market is showing a bearish bias, underscoring the persistent fears of a deeper decline. The one-, three-, and six-month put-call skews are currently delivering positive values, suggesting that puts (bearish bets) are fetching higher prices (demand) than calls.