Bitcoin Option Traders Now Betting on Short-Term Price Drop

With bitcoin looking heavy this week, short-term sentiment in the options market has flipped bearish.

AccessTimeIconJul 16, 2020 at 12:06 p.m. UTC
Updated Sep 14, 2021 at 9:31 a.m. UTC
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With bitcoin looking heavy this week, short-term sentiment in the options market has flipped bearish.

  • The leading cryptocurrency by market value fell to $9,070 soon before press time, reversing the 2.5% rise to $9,450 seen last week, according to CoinDesk’s Bitcoin Price Index.
  • Prices are now closing on the lower end of the multi-week-long trading range of $9,000–$10,000.
  • Reflecting the downward trend, the one-month put-call skew for bitcoin options, a metric that measures the price of (bearish) put options relative to (bullish) call options, has risen to 4.9%, according to data provided by crypto derivatives research firm Skew.
  • The positive number indicates short-term put options are drawing higher prices than calls.
  • Traders, the data suggests, are making speculative bets to the downside or are hedging against a potential bearish move (that is, buying puts against long positions in the spot market), Shaun Phoon, senior trader at QCP Capital, told CoinDesk.
One-month put-call skew for bitcoin options
One-month put-call skew for bitcoin options
  • The one-month skew was hovering at lows below -7% a week ago, indicating stronger demand for call options – a sign of bullish bias in the options market.
  • While the one-month skew is now more bearish, the six-month skew remains below zero or bullish.
  • Demand for call options expiring in December is still higher than that for puts.
  • The three-month skew is hovering in the neutral zone near 0%.
BTC three- and six-month skews
BTC three- and six-month skews

Disclosure: The author holds no cryptocurrency assets at the time of writing.

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