Open Positions in Ether ‘Calls’ Hits 1 Million Mark as Traders Pile Onto Higher Strike Options
Open interest in ETH call options, or bullish bets, is twice more than that in puts.
Ether’s options market flows appear more bullish than ever, with the cryptocurrency eyeing the psychological level of $5,000.
Data tracked by Swiss-based analytics firm Laevitas shows there are currently 1.02 million call option contracts ($4.8 billion) open on the Deribit exchange – perhaps a record figure and twice more than the put option tally of 426,950 ($2 billion).
The big gap reflects top-side bias. “[That’s] pretty bullish positioning,” Amber Group said in a Telegram chat. “skew is favoring topside as well.” Traders buy call options to bet on price increases and seek downside protection via puts when anticipating a correction.
Both short-term and longer-duration calls are drawing higher prices than puts at press time, as evident from the negative one-week, one-, three- and six-month put-call skews. Put-call skews measure the cost of puts relative to calls.
As seen below, the majority of open interest is concentrated in the so-called out-of-the-money or higher strike call options. On Deribit, the world’s largest crypto options exchange by volume and open interest, one ether options contract represents 1 ETH.
Call options at $5,000, $10,000, and $15,000 account for nearly 300,000 in open positions.
According to QCP Capital, increased buying in the $15,000 call has been driven by last month’s high conviction recommendation by Real Vision Founder Raoul Pal.
“On Deribit, you can buy the March 2022 [expiry] $15,000 calls for around $167 [premium paid to purchase call],” Pal said in a note to clients, according to QCP Capital’s Telegram broadcast dated Oct. 28.
Pal called the trade a lottery ticket, meaning the maximum loss a buyer would suffer is limited to the extent of the premium paid for a single contract, i.e., $167. At the same time, profit can be huge if ether rallies to $15,000 or more.
“If it goes to $20,000, you make 28x. If it goes to $40,000, you make 85x,” Pal said.
Traders have been buying cheap out-of-the-money call options since the first quarter in a bid to make millions on a relatively small investment.
Ether, the native token of Ethereum’s blockchain, is currently trading at record highs near $4,800, representing a 550% year-to-date gain versus bitcoin’s 134% rally.
Investors have been snapping up ether in recent weeks on expectations that U.S. regulators would approve an ETH futures-based exchange-traded fund (ETF).
“Our flow report again shows a stronger bid [bullish] side bias for ETH (55.6% buying) over BTC (51.7% buying),” Adam Farthing, chief risk officer at crypto liquidity provider and over-the-counter trader B2C2 Japan, said in a weekly note published Monday.
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. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.
Learn more about Consensus 2023, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.