Bitcoin call options see surge in demand for first expiry after US election, Deribit CEO says

Derivatives traders are positioning for a bullish trajectory for bitcoin in the days after the U.S. election on Nov. 5, according to Deribit CEO Luuk Strijers. He added that data shows there are twice as many bitcoin call options as put options set for the Nov. 8 options expiry, the first expiry following the U.S. presidential election.

"For the 8 November options expiry there is an Open Interest of over $2 billion with $70,000, $75,000 and $80,000 as the dominant strikes, with a put-call ratio at 0.55 indicating twice as many calls vs puts outstanding," Strijers told The Block.

Strijers added that the forward implied volatility is 72.29%, which indicates a potential price swing of around 3.78% in the days following the presidential election.

Increase in implied volatility after the U.S. election

Strijers shared charts that show the term structure for bitcoin options, showing both mark implied volatility (Mark IV) and forward IV across various future dates.

"There is a clear elevation in Forward IV compared to Mark IV, particularly during the election week indicating that traders expect higher volatility," Strijers added.

However, Strijers added that the peak implied volatility is brief, indicating the market is not expecting longer-term uncertainty. "25 Delta Skew (put-call) is negative across the board indicating that the market anticipates larger upside movements, bullish sentiment," Strijers said.

He added that the demand for call options relative to puts is strong, with investors less concerned about managing downside risk.

Bitcoin options traders position for price gains post-U.S. election

The optimism among derivatives traders for the price trajectory of bitcoin for the days following the U.S. election was also noted by Arbelos Markets CEO Joshua Lim, who observed an increase in market participants purchasing post-election expiry call options at the $70,000-$80,000 strike price range.

"There’s been a combination of month-end systematic selling by yield-seekers and a 'steepening' bias to buy post-election call options cheapened by selling pre-election options," Lim told The Block. This strategy signals expectations of a potential upward price breakout in bitcoin's market trajectory despite the uncertainties looming in global markets.

"I see a surge in call buying of strikes in the $70,000-$80,000 range and selling of $100,000 plus as the expectation is for implied volatility to come in once the election resolves," he added.

According to Lim, bitcoin is increasingly seen as both an inflation hedge and a proxy for the U.S. presidential election, particularly in the event of a Donald Trump victory. "The options market is pricing a 7% move on the U.S. election day, which feels a touch low relative to Bitcoin's beta to risk assets," he said.

Adding to the optimistic sentiment, Standard Chartered Global Head of Digital Assets Research Geoff Kendrick said bitcoin could approach its all-time high of over $73,000 on Nov. 5, the day of the U.S. presidential election. The Standard Chartered head of digital assets research bases his forecast on an analysis of bitcoin derivatives and trading volume indicators.

"We use daily bitcoin volume levels and popular strike levels to estimate post-election price moves. Our base case is that the bitcoin price will be around $73,000 on election day," Kendrick said in an email on Thursday.