Home Cryptocurrency How relevant is the $900M open interest on Bitcoin options above $100K?

How relevant is the $900M open interest on Bitcoin options above $100K?

by Serge Shlykov

Bitcoin’s recent surge in value has not only made it the world’s biggest cryptocurrency, but also the world’s biggest market for cryptocurrency trading. In order to keep up with demand, a lot of traders are using leverage in the form of options. In September, Open Interest (a metric calculated by options researcher Markit) crossed the $900m mark for the first time, signaling that there was a lot of leverage being traded. The implication, is that many highly-leveraged traders are now looking to exit their positions and liquidate their positions in order to raise cash.

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There were 10,061 Bitcoin options contracts outstanding with open interest above $100K on June 19, 2018, which is a daily trading volume of about $900M.

The last time we checked, Bitcoin options were trading for around $1,000 per contract. Today, the price of Bitcoin is $6,300, and as such, the open interest on contracts that are out-of-the-money—meaning they are trading close to the strike price—has reached a staggering $908 million.. Read more about btc options table and let us know what you think.

Bitcoin (BTC) is fast approaching its worst monthly performance in a decade, but some investors are taking advantage of this to buy extremely bullish long-term derivatives. There is currently over $900 million worth of call options for $100,000 or more, but what exactly are these investors looking for? Option instruments can be used for a variety of strategies, including hedging and helping those who want to bet on specific outcomes. For example, a trader can expect a period of lower volatility in the short term, but at the same time significant price volatility through the end of 2021. What most inexperienced traders don’t realize is that an investor can sell (buy) a September super bull call to add profit to a short-term strategy without expecting to carry it to expiration. Profit/loss estimates for bitcoin options. Source: Deribit position builder The chart above shows the net result of a bitcoin sale at $40,000 on the 30th. July. If the price remains above this threshold, the investor receives a profit of 0.189 BTC. In addition, any result below $33,700 would be a negative result. For example, the net loss on $30,000 is 0.144 BTC. The same transaction would occur in the following example, but the investor would also buy 40 call option contracts for $140,000 on the 24th. September sales. The investor forgoes the benefit of a potential price increase in exchange for a higher net return at current levels. Profit/loss estimates for bitcoin options. Source: Deribit position builder How relevant is the $900M open interest on Bitcoin options above $100K? Note that the same result at $40,000 now yields 0.464 BTC and any price level above $26,850 yields a positive result. However, because of the extremely bullish calls, the trade will also have a negative result if bitcoin is sold on the 30th. July was trading above $68,170. As a result, individual analysis of these over-the-counter options does not always provide a clear indication of investors’ intentions. Total open interest in bitcoin options: Source: Bybt How relevant is the $900M open interest on Bitcoin options above $100K? There are currently 24,625 option contracts to buy bitcoin at or above $100,000, representing $910 million in open interest. Sure, it sounds like a lot, but the current market value of these ultra-liquid options is $15.4 million. For example, a call option with a date of December 31 and a strike price of $120,000 to $1,500. For comparison, a $30,000 protection put option on the 30. July is worth $2,700. So instead of focusing solely on the open interest rate, one should look at the fair value of each option. While these $300,000 bitcoin call options make headlines, they don’t necessarily reflect investors’ true expectations. For bitcoin holders, it makes sense to sell call options worth $100,000 or more and pocket the premium. At worst, a $100,000 sale could happen in December, which doesn’t seem like a bad investment at all. The views and opinions expressed herein are those of the author and do not necessarily reflect those of Cointelegraph. Every investment and every stage of trading involves risk. You should do your own research before making a decision.So, what is open interest? In the simplest terms, it is the number of contracts that are open at any given time. When someone creates an option contract, it creates an offer to buy or sell the underlying asset at a certain price on or before a certain date in the future. The value of the contract is the difference between the price at which you are buying or selling the underlying, and the strike price on the contract.. Read more about bitcoin options expiry time and let us know what you think.

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