A $10M Options Bet on Ether Shows Positioning for a Bullish Second Half

A large ether bull call spread crossed the tape Friday, according to Amberdata. The trade involved December call options with strike prices at $1,900 and $2,500.

AccessTimeIconJul 3, 2023 at 9:11 a.m. UTC
Updated Jul 3, 2023 at 6:22 p.m. UTC
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Ether (ETH) jumped 61% in the first six months of the year. Traders are now betting the rally in the token of Ethereum, the world's biggest smart-contract blockchain, could extend in the second half.

On Friday, an investor purchased roughly 63,250 "bull call spreads" tied to ether and due for expiry on Dec. 29, according to data source Amberdata. The trade involved the sale of a call option at the $2,500 strike price to partly fund the purchase of a call option at the $1,900 strike.

The strategy cost an initial $10 million as the trading entity shelled out more to buy the $1,900 call than it received from selling the $2,500 call. A call buyer gets protection from the seller against price rallies. In return, the call seller receives an upfront premium from the buyer.

"For Ethereum to highlight call spread $1,900-$2,500 on December for around $10M of net premium paid: MASSIVE," Greg Magadini, director of derivatives at Amberdata, said in a newsletter late Sunday.

The strike prices chosen suggest a predominant desire for bullish directional exposure, Magadini said. One ether options contract represents one ETH.

Large ETH bull call spreads crossed the tape on on Friday, according to Amberdata's block trade tracker.
Large ETH bull call spreads crossed the tape on on Friday, according to Amberdata's block trade tracker. (Amberdata)

Bull call spreads, or bullish vertical spreads, are quite popular in traditional markets as well as crypto because they limit potential losses and profit.

The strategy will be profitable as ether's price rises, although the profit potential is constrained to the difference between the strike prices minus the initial cost pair. The strategy will be unprofitable if ether trades below $1,900 at the end of December. The loss, however, is limited to the extent of the initial cost paid.

The indication is that the buyer of the bull call spread probably expects a gradual ether price increase over the next six months.

"Bullish call spreads are typical directional trades," Chang, a partner and analyst at crypto data tracking platform Greeks.Live, told CoinDesk, adding that increased interest in these strategies does not necessarily promise an ether rally. Crypto services provider Matrixport, however, says ether is due for a notable move higher.

Ether changed hands at $1,966 at press time, the highest since May 6, according to CoinDesk data.

"During the mid-June 223 lows, we got a buy signal when ether traded at $1,700. Now at $1,920, prices have rallied, but we think the chance for an explosive move higher has arrived," Matrixport's head of research and strategy, Markus Thielen, said. "Ether could catch up with bitcoin."

Bitcoin rallied by nearly 85% in the first half, outshining many other coins by a wide margin.

The options market as a whole is biased bullish on both ether and bitcoin, with short-term and long-term call-put skews returning positive values at press time. Skews measure the cost of calls, or bullish sentiment, relative to bearish puts.

Positive values suggest a bias for bullish call options. (Amberdata)
Positive values suggest a bias for bullish call options. (Amberdata) (Amberdata)

Edited by Sheldon Reback.


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Omkar Godbole

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

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