Bitcoin Options Volume on CME Jumps 300% as Traders Take Bullish Bets

Activity in bitcoin options listed on the Chicago Mercantile Exchange (CME) surged Wednesday as investors traded call options, or bullish bets.

According to data source Skew, the CME traded $48 million worth of options during the day, the highest daily volume figure since July 28.
The number marks a 300% rise from Tuesday's figure of $12 million.
"The CME options had a strong session, and the spike in the volume was mainly due to increased activity in call options," Skew's CEO Emmanuel Goh told CoinDesk over Telegram.
Options are derivative contracts used to hedge against sudden price swings or uncertainty in the spot market.
A call option gives the holder the right to buy or sell the underlying asset at a predetermined price on or before a specific date; a put option represents a right to sell.

Volumes surged as some traders took $14,000 and $16,000 strike prices and $18,000 and $20,000 strike prices for the December 2020 and March 2021 expiry contracts, Skew noted early Thursday.
These can potentially be bullish structures [bull call spreads], Vishal Shah, an options trader and founder of derivatives exchange Alpha5, told CoinDesk, adding that traders are unlikely to sell spreads in the current low volatility environment.
"The likely case is that we're seeing some strategic gearing for the topside," Shah said.
To simplify, traders likely bought call options at $14,000 expiring in December and simultaneously sold December expiry calls at $16,000. Similarly, calls expiring in March 2021 were bought at $18,000 and sold at $20,000.
Traders employ bull call spreads when they expect the underlying asset to chart a limited rally in the near term.
The data suggests some traders foresee a bitcoin rally, but believe the upside will be capped near $16,000 until the end of December. Further, they expect prices to remain below $20,000 till the end of the first quarter of 2021.
Bitcoin is currently trading near $10,600, trapped in a narrowing price range for the third week.

A breakout would imply an end of the pullback from the August high of $12,476 and would expose resistance above $11,000.
Alternatively, a range breakdown may invite stronger chart driven selling, possibly yielding a re-test of September lows below $9,900.
Disclosure: The author holds small positions in bitcoin and litecoin.

Also read: Bitcoin’s Options Market Retains Long-Term Bull Bias Despite Sluggish Price

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Omkar Godbole

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