Ether Call Demand Signals Anticipation of Year-End Rally

Investors who buy calls are implicitly bullish on the market.

AccessTimeIconDec 20, 2021 at 11:14 a.m. UTC
Updated May 11, 2023 at 5:26 p.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global hub for everything crypto, blockchain and Web3.Register Now

Notably bullish flows hit ether’s options market early Monday, indicating budding hope for a recovery rally ahead of the year-end.

Institution-focused over-the-counter (OTC) desk Paradigm saw 18,500 contracts for the $4,400 call option and 14,000 contracts for the $4,200 call option change hands during Asian trading hours. These trades due for expiry on Dec. 31 were executed on Paradigm and booked on Deribit, the leading exchange for cryptocurrency options by volume and open interest.

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 call buyer is implicitly bullish on the underlying asset.

While options’ primary use is to protect spot or futures market exposure from unexpected bullish or bearish moves, speculators sometimes bet on the underlying asset by simply buying calls or puts.

“The two trades were traded live and appear to be a large directional bet for a move higher into year-end,” Patrick Chu, director of institutional sales and trading at Paradigm, told CoinDesk.

Theoretically, the $4,400 call represents a bet that ether would settle above that level on Dec. 31. However, buyers can square off positions before the expiry if ether (ETH) chalks a quick move higher, boosting the value of bullish bets.

Note that out-of-the-money (OTM) calls at strikes higher than the underlying asset’s current market price (CMP) are relatively cheap compared with strikes at or below the CMP and tend to gain significant value on a sudden move higher. Thus, traders often snap up OTM calls in a bid to make outsized gains.

Despite sizeable buying activity in the $4,200 and $4,400 calls, the overall options market still signals caution.

According to data tracked by crypto derivatives research firm Skew, the one-week and the one-, three- and six-month put-call skews are positive, a sign of puts or downside bets drawing higher prices or demand than calls.

Ether is currently trading near $3,800, representing a 3% decline on the day. The token powering Ethereum’s blockchain seems to have found acceptance under a five-month bullish trendline.

Ether's daily chart (TradingView)
Ether's daily chart (TradingView)

Disclosure

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is an award-winning media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. In November 2023, CoinDesk was acquired by Bullish group, owner of Bullish, a regulated, institutional digital assets exchange. Bullish group is majority owned by Block.one; both groups have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary, and an editorial committee, chaired by a former editor-in-chief of The Wall Street Journal, is being formed to support journalistic integrity.

Omkar Godbole

Omkar Godbole is a Co-Managing Editor on CoinDesk's Markets team.


Learn more about Consensus 2024, 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.