Bitcoin’s Option Market Is Now Skewed Bullish

Bitcoin’s price jumped to fresh 11-month highs on Friday with the options market betting on a sustained bull move.

Jul 31, 2020 at 7:39 p.m. UTC
Updated Sep 14, 2021 at 9:38 a.m. UTC

Bitcoin’s price jumped to a fresh 11-month high on Friday, with the options market betting on a sustained bull move. 

  • The top cryptocurrency by market cap rose to a high of $11,467 during the U.S. trading hours, surpassing the previous multi-high month high of $11,394 reached on Monday.
  • Bitcoin has rallied 24% in July and looks overbought as per the 14-day Relative Strength Index, a widely tracked technical indicator.
  • Options market data shows sentiment is quite bullish. Options are derivative contracts that give the purchases the right but not the obligation to buy or sell the underlying asset at a predetermined price on or before a specific date. A call option represents the right to buy and the put options gives the buyer the right to sell.
  • The one-, three- and six-month put-call skews, which measure the price of puts relative to that of calls, are negative. This is a sign calls, or bullish bets, are drawing higher value than puts, or bearish bets.

BTC put-call skew

  • Investors appear to be selling more put options and buying call options because the put-call open interest ratio that measures the number of put options (or bearish bets) open against calls (or bullish bets) has risen to a two-month high of 0.63, according to data source Skew.

BTC Put-call open interest ratio

The put-call open interest ratio looks to have risen from 0.50 to 0.63 this week due to greater selling in put options.

With the combination of negative skews and a rising put-call open interest ratio, bitcoin’s latest move above $10,000 looks like it can be sustained.

DISCLOSURE

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