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Some bitcoin options traders are making wacky bets, betting on a rally to a six-figure price by the end of the year even as the cryptocurrency continues to struggle after last month’s 35% drop.
According to data provided by Laevitas, the leading cryptocurrency options exchange Deribit saw a total of 425 bitcoin call option contracts, with an exercise price of $ 200,000 and an expiration date. on December 31, change hands on Thursday. This strike price is approximately five times the current level.
A call option is a derivative contract that gives the buyer the right but not the obligation to buy the underlying asset at a predetermined price on or before a specific date. Theoretically, buying a $ 200,000 strike call expiring on December 31st is a bet that the cryptocurrency will end the year above that level.
Although the transaction size is relatively small compared to similar bets covered by CoinDesk in the past, bets remain attractive for several reasons. For starters, the $ 200,000 call options represent a long-term bet, with an expiration date in six months.
And because options have so far been out of the money (hitting well above the spot market price), they’re extremely cheap, currently trading at 0.018 BTC ($ 698) on Deribit.
This makes the options the equivalent of a lottery ticket: Buyers will only lose $ 698 per lot if the market doesn’t go up by December 31. But the option would theoretically gain significant value if the bullish mood returns to the market.
Such low risk bets are commonly seen in bull racing. For example, traders crammed into the $ 80,000 call option in March, when bitcoin was on a strong upward trajectory and was trading at highs above $ 50,000.
Bitcoin hit an all-time high of nearly $ 65,000 in April, but the price has since fallen and now appears to be consolidating below $ 40,000. At the time of going to press, the largest cryptocurrency was changing hands at around $ 37,500.
Recently, the market has been filled with pessimism. However, of all the options listed on Deribit, the $ 100,000 call is the most popular, with open interest on expiration of 9,000.
The graph also shows a small build-up of open interest in calls of $ 300,000 and $ 400,000.
Generally speaking, however, the options market has a bearish bias, highlighting lingering fears of a deeper decline. One-, three- and six-month put-call biases are currently returning positive values, indicating that puts (bearish bets) get higher prices (ask) than calls.
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