Bitcoin call options cluster at $70,000 shows bullish skew, analyst says

Markets • March 7, 2024, 9:41AM EST

Published 1 minute earlier on

Quick Take

Bitcoin call options are concentrated at a strike price of $70,000 ahead of Friday’s end-of-week and March’s end-of-month expiry, according to Deribit data.
The put-call skew ahead of Friday’s end-of-week and March’s end-of-month bitcoin options expiry is a bullish indicator for the market, an analyst said.

Bitcoin options are signaling bullish sentiment, evidenced by the strike positioning and put-call ratio for March's end-of-month expiry, according to one analyst.

"Since the recent ascent of bitcoin to a new all-time high, the highest instruments traded by volume are monthly and mid-month expiry call options with a strike price of $70,000," Bitfinex Head of Derivatives Jag Kooner told The Block.

This concentration of calls at the $70,000 strike price is shown for both Friday's end-of-week and March's end-of-month expiries on Deribit, the largest bitcoin options platform in the world.

There has been a concentration of call options at the strike price of $70,000 in the past 24 hours. Image: Deribit.

Kooner postulates that the current put-call ratio of bitcoin options indicates traders are exhibiting a bullish bias. "The put-call ratio has stayed below 0.6 consistently for the first time in 6 months, with the 24 hour put-call ratio at an even more bullish outlook of 0.47," Kooner said.

According to The Block's Data Dashboard, the global put-call ratio for bitcoin options is now at 0.6. A put-call ratio of less than 1 implies bullish sentiment, indicating more interest in potential upside (calls). In contrast to this, a put-call ratio greater than 1 typically suggests bearish sentiment, indicating more interest in downside protection (puts).

Implied volatility decreases

The Bitfinex head of derivatives noted the recent decrease in implied volatility in the options market, indicating lower volatility expectations among traders in the past 24 hours. As a result, the premium for options has dropped across all strike prices, making the costs to take on positions cheaper. Deribit's implied volatility index for bitcoin dropped to 72% from 77% the past 24 hours.

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"Declining implied volatility values often cause a decline in option premiums because the expectation of a lack of volatility in the future as compared to the past allows for lower risk for options market participants," Kooners added.

Options are derivative contracts that give a trader the right but not the obligation to buy or sell the underlying asset at a predetermined price on or before a specific date. A call option gives the right to buy, and a put offers the right to sell. It is assumed that a trader who buys put options is implicitly bearish on the market, while a call buyer is bullish.

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About Author

Brian McGleenon is a UK-based markets reporter for The Block. He has worked as a financial journalist and producer for multiple news outlets over the years, such as Fuji Television, The Independent, Yahoo Finance, The Evening Standard, and The Daily Express. Brian is also a screenwriter and producer with one feature film produced and one in development with Northern Ireland Screen. Apart from web3 and cryptocurrency developments, he is also interested in geopolitics, environmental issues, artificial intelligence, and longevity research. Get in touch via email [email protected].