Some bitcoin options traders are making incredible bets, betting on a rise to six figures by the end of the year, even as the cryptocurrency continues to struggle after falling 35% last month.
On Thursday, the dominant cryptocurrency options exchange Deribit changed hands, according to data provided by Laevitas, 425 bitcoin call options contracts with a strike price of $ 200,000 and an expiration date of December 31. This strike price is about five times the current level.
A call option is a derivative contract that gives the buyer the right, but not the obligation, to buy the underlying asset at a predetermined price on or before a specified date. In theory, buying a call with a $ 200,000 strike expiring on December 31st is a bet that the cryptocurrency will surpass that level at the end of the year.
While the deal size is relatively small compared to similar games that CoinDesk has offered in the past, betting is still interesting for several reasons. To begin with, $ 200,000 Calls are a long-term bet that will expire in six months.
And since the options are not yet in the money (the price is well above the spot market price), they are extremely cheap, currently trading on Deribit at 0.018 BTC ($ 698).
This makes options the equivalent of a lottery ticket: buyers could only lose $ 698 per lot if the market doesn’t move up by December 31st. But in theory, the option will have significant value if the bullish sentiment returns in the market.
This kind of low risk gambling is usually seen during bull races. For example, traders invested in a $ 80,000 call option in March when bitcoin was on a strong upward trajectory and was trading at highs above $ 50,000.
Bitcoin surged to an all-time high of nearly $ 65,000 in April, but the price has since dropped and now appears to be consolidating below $ 40,000. At the time of publication, the largest cryptocurrency was changing hands at a price of about $ 37,500.
The market has been filled with gloom and decline lately. However, of all the options listed on Deribit, the $ 100,000 call is the most popular with an open interest of 9,000 for the entire duration.
The chart also shows a slight increase in open interest in calls of $ 300,000 and $ 400,000.
Overall, however, the options market is bearish, highlighting ongoing concerns about a deeper decline. The asymmetry of the put calls after one, three and six months now returns positive values, which indicates that put options (bearish rates) bring higher prices (demand) than calls.