Ether Put-Call Ratio Hits One-Year High, Hints at Bullish Bias Despite Pause in Rally

The uptick signals a bullish outlook, according to Wintermute.

AccessTimeIconMay 30, 2024 at 12:16 p.m. UTC
  • Ether's put-call open interest ratio rose to 0.61 Wednesday, Glassnode data show.
  • The uptick signals a bullish outlook, Wintermute said.

Ether’s (ETH) price rally has stalled since Monday. Still, a popular options market gauge continues to exhibit a bullish bias.

The token's price has pulled back to $3,730 from the two-month high of $3,973 reached Monday, CoinDesk data show. Prices were on a tear last week after the U.S. SEC moved closer to approving the highly-anticipated spot ether exchange-traded funds (ETFs).

Ether’s put-call open interest ratio, which compares the number of active put or bearish contracts versus bullish or call options, rose to 0.61 on Deribit early Thursday, the highest in at least a year, according to data source Glassnode.

An uptick in the ratio is said to reflect a bullish bias, although movements in the ratio are subject to interpretations.

“Ethereum’s put-call ratio has reached 0.6, signaling a bullish outlook following spot ETH ETF approvals,” algorithmic trading firm Wintermute said in a note shared with CoinDesk.

A put option gives the option buyer the right to sell the underlying asset at a specific price by a stated date. Savvy traders and investors typically use options to hedge spot market positions and collect additional yield on top of coin holdings. A relatively higher number of active put options can stem from traders adding puts to protect their coin holdings (bullish spot market position) from a sudden price drop.

Another possibility is traders selling put options in a rising market to generate additional income in addition to their spot market holdings. A put option seller receives a premium as compensation for offering insurance against price drops.

Ether put-call open interest ratio.(Glassnode)
Ether put-call open interest ratio.(Glassnode) (Glassnode)

The bullish interpretation of the rising ratio is consistent with positive call-put skews across time frames. As of writing, the seven-day skew stood at 2% while the 30-, 60-, 90- and 180-day skews returned a value of over 5%, according to Amberdata. That’s a sign of the relative richness of calls or bullish bets.

That said, traders should be mindful of a continued rise in the put-call open interest ratio. A very high ratio, above 1, indicates extreme bullishness and is taken to represent an impending market top by contrarian investors. Readings below 0.20 and lower indicate extreme bearishness, traditionally seen at bear market bottoms.

Edited by Parikshit Mishra.


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Omkar Godbole

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