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Options Market Shows Call Bias as Bitcoin Prepares for New Price High

Bitcoin's call options are drawing higher value than puts.

Apr 1, 2021 at 10:12 a.m. UTC
Updated Sep 14, 2021 at 12:34 p.m. UTC

Bullishness looks to be building in the bitcoin options listed on the dominant Deribit exchange, with the cryptocurrency trading just 4.6% short of a new record high.

  • Options skew, which measures the difference between the call implied volatility and put implied volatility for all options, is creeping up, as tweeted by the options analytics platform Genesis Volatility.
  • In plain English, that means call options are again drawing greater demand or premium than puts in a sign of bullish bias.
  • Implied volatility refers to investors' expectations for price turbulence over a specific period and positively impacts the option's price. Hence, an uptick in the call-put implied volatility spread is considered a sign of bullish positioning.
  • A call option gives the purchaser the right but not the obligation to buy the underlying asset at a predetermined price on or before a specific date. A put option gives the buyer the right to sell.

Bitcoin call-put skews

  • Both short- and long-term skews are ticking higher. The call bias had weakened in the second half of March, with bitcoin witnessing a healthy bull market correction from the record high of $61,557 to $50,400.
  • Bitcoin is currently trading near $59,800 at press time, representing a 5.6% gain on the week, as per CoinDesk 20 data.
  • According to Swiss-based options analytics firm Laevitas, "fireworks will ensue" once the psychological resistance of $60,000 is breached.
  • Traders are positioning for a solid rally in the short term via deep out-of-the-money calls such as the one at $80,000.
  • At press time, the total open interest in the $80,000 call option is more than 5,000 contracts, the highest among options listed on Deribit with an April 30 expiry.
  • Some analysts say the daily chart flag breakout – a bullish chart pattern – has opened the doors for a rally to at least $70,000 in the next few weeks. The flag pattern, however, is disputed, as discussed Wednesday.

DISCLOSURE

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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