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

Trading volumes for CME bitcoin options surged as traders made bull call spreads, anticipating a rally.

Oct 8, 2020 at 11:56 a.m. UTC
Updated Sep 14, 2021 at 10:06 a.m. UTC

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.

CME bitcoin options volume

  • 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.

Bitcoin daily chart

  • 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.

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