{"id":263402,"date":"2021-05-31T23:35:00","date_gmt":"2021-05-31T20:35:00","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/how-relevant-is-the-900m-open-interest-on-bitcoin-options-above-100k\/"},"modified":"2021-05-31T23:35:00","modified_gmt":"2021-05-31T20:35:00","slug":"how-relevant-is-the-900m-open-interest-on-bitcoin-options-above-100k","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/how-relevant-is-the-900m-open-interest-on-bitcoin-options-above-100k\/","title":{"rendered":"# How relevant is the $900M open interest on Bitcoin options above $100K?"},"content":{"rendered":"

“# How relevant is the $900M open interest on Bitcoin options above $100K? <\/strong>”<\/p>\n

Bitcoin (BTC) is fast app<\/a>roaching its worst monthly performance in a decade, but some investors are using this as an opportunity to buy ultra-bullish long-term derivatives. There are currently over $900 million in call (buy) options aiming at $100,000 and higher, but what exactly are those investors seeking?<\/p>\n

Options instruments can be used for multiple strategies, which include hedging (protection) and also aiding those betting on specific outcomes. For example, a trader could be expecting a period of lower volatility in the short-term, but at the same time, some significant price oscillation towards the end of 2021.<\/p>\n

Most novice traders fail to grasp that an investor might sell an ultra-bullish call (buy) option for September to improve gains on a short-term strategy, therefore not expecting to carry it until the expiry date.<\/p>\n

Bitcoin option profit\/loss estimate. Source: Deribit Position Builder<\/em><\/figcaption><\/figure>\n

The chart above shows the net result of selling a Bitcoin $40,000 July 30 put. If the price remains above that threshold, the investor scores 0.189 BTC gain. Meanwhile, any outcome below $33,700 will yield a negative result. For example, at $30,000, the net loss is 0.144 BTC.<\/p>\n

The same trade will occur in the example shown below, but the investor will also sell 40 contracts of the $140,000 call option for Sept. 24. The investor is letting go of gains from a potential price increase in exchange for higher net profit at present levels.<\/p>\n

Bitcoin option profit\/loss estimate. Source: Deribit Position Builder<\/em><\/figcaption><\/figure>\n

Take notice of how the same $40,000 outcome now results in a 0.464 BTC gain, and any price level above $26,850 yields a positive result. However, due to ultra-bullish calls, the trade will also net negative outcomes if Bitcoin trades above $68,170 on July 30.<\/p>\n

Therefore, analyzing those ultra-bullish options separately doesn’t always provide a clear picture of investors’ intentions.<\/p>\n

Aggregate Bitcoin options open interest: Source: Bybt<\/em><\/figcaption><\/figure>\n

There are currently 24,625 Bitcoin call option contracts at $100,000 or higher, equivalent to $910 million in open interest. <\/p>\n

Sure, it sounds like a lot, but the current market value of these ultra-bullish options is $15.4 million. For example, a Dec. 31 call option with a $120,000 strike is worth $1,500.<\/p>\n

As a comparison, a $30,000 protective put option for July 30 is worth $2,700. Therefore, instead of focusing exclusively on open interest, one should factor in the actual cost for each option. <\/p>\n

While these flashy $300,000 Bitcoin call options make headlines, it does not necessarily reflect true investors’ expectations.<\/p>\n

For Bitcoin holders, it makes sense to sell $100,000 and higher call options and pocket the premium. Worst case scenario, one will be making a sale in December at $100,000, which does not sound like a bad investment at all.<\/p>\n

The views and opinions expressed here are solely those of the <\/em>author<\/em><\/a> and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.<\/em><\/p>\n