Some bitcoin options traders are making outlandish wagers, betting on a rally to a six-figure price by year end even as the cryptocurrency continues to struggle following last month’s 35% drop.
According to data provided by Laevitas, the dominant cryptocurrency options exchange Deribit saw a total of 425 bitcoin call option contracts, with a strike price of $200,000 and an expiration date of Dec. 31, change hands on Thursday. That strike price is roughly five times the current level.
A call option is a derivative contract that gives the purchaser the right but not the obligation to buy the underlying asset at a predetermined price on or before a specific date. Theoretically, buying a call at the $200,000 strike expiring on Dec. 31 is a bet that the cryptocurrency will end the year above that level.
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While the trade size is relatively small compared with similar gambles that CoinDesk has covered in the past, the wagers are still interesting for several reasons. To begin with, the $200,000 call options represent a long-term bet, with an expiration date a full six months away.
And because the options are so far out-of-the-money (strike well above the spot market price), they are extremely cheap, currently trading at 0.018 BTC ($698) on Deribit.
That makes the options the equivalent of a lottery ticket: Buyers stand to lose just $698 per lot if the market doesn’t move higher until Dec. 31. But the option would theoretically gain significant value if the bullish mood returns to the market.
Such low-risk gambles are commonly observed during bull runs. For instance, traders piled into the $80,000 call option in March, when bitcoin was on a strong upward trajectory and trading at highs above $50,000.
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Bitcoin rose to an all-time high of nearly $65,000 in April, but the price has since tumbled and now appears to be consolidating under $40,000. At press time, the largest cryptocurrency was changing hands at around $37,500.
Recently, the market has been filled with doom and gloom. However, of all the options listed on Deribit, the $100,000 call is the most popular, with an expiry-wide open interest of 9,000.
The chart also shows a small build-up of open interest in the $300,000 and $400,000 calls.
Broadly speaking, however, the options market has a bearish bias, highlighting persistent fears of a more profound decline. The one-, three- and six-month put-call skews are currently returning positive values, indicating that puts (bearish bets) are fetching higher prices (demand) than calls.
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