Bitcoin Call Skew Hints at Further Price Rise as Spot ETF Optimism Energizes BTC

The one-month call-put skew has risen above 10%, indicating a strongest bullish bias in 31 months.

AccessTimeIconNov 9, 2023 at 7:51 a.m. UTC
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A gauge used by options traders for predicting the direction of bitcoin (BTC) is now exhibiting the strongest bullish bias in 31 months.

Bitcoin's 25-delta one-month call-put skew, which assesses the relative price of calls versus puts expiring in four weeks, has risen above 10%, reaching the highest since April 2021, according to data tracked by Amberdata. In other words, demand for calls or bullish bets is outpacing puts, offering downside protection.

With spot ETF optimism driving BTC above $36,800 on Thursday, investors have likely stopped selling calls above the cryptocurrency's spot price, a popular strategy to generate additional yield on top of coin holdings.

Meanwhile, speculators could be buying call options to have leveraged upside exposure. Longer duration call-put skews also show a bias for continued BTC strength over two, three, and six months.

Long call (buy call option) trades account for 44% of the total activity on the leading exchange Deribit in the past 24 hours. (Amberdata)
Long call (buy call option) trades account for 44% of the total activity on the leading exchange Deribit in the past 24 hours. (Amberdata) (Amberdata)

A call option gives the purchaser the right but not the obligation to purchase the underlying asset at a predetermined price on or before a specific date. A call buyer is implicitly bullish on the market. A put option gives the right to sell.

Traders have been scrambling to buy call options for the past few weeks, leaving market makers with a significant amount of net short exposure above $36,000. With prices above the said level, market makers will likely buy the cryptocurrency to adjust their net exposure back to market-neutral, inadvertently accelerating the rally.

Edited by Parikshit Mishra.

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Omkar Godbole

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


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