How important is the $900 million open interest in Bitcoin options over $100,000?


Bitcoin (Bitcoin) Is rapidly approaching its worst monthly performance in a decade, but some investors are taking advantage of this opportunity to buy ultra-bullish long-term derivatives. There are currently more than US$900 million in buy (buy) options with a target price of US$100,000 or higher, but what are these investors looking for?

Options tools can be used in a variety of strategies, including hedging (protection) and helping those who bet on specific results. For example, traders may expect lower volatility in the short term, but at the same time, by the end of 2021, prices will experience greater volatility.

Most novice traders are not sure that investors may sell ultra-bullish call (buy) options in September to increase the returns of short-term strategies, so they do not want to hold the options before the expiry date.

Bitcoin options profit and loss forecast.Source: Derbit Position Generator

The above chart shows the net result of selling Bitcoin for $40,000 on July 30. If the price is still above the threshold, the investor will receive a gain of 0.189 BTC. At the same time, any result below $33,700 will produce a negative result. For example, at $30,000, the net loss is 0.144 BTC.

In the example below, the same transaction will be performed, but the investor will also sell 40 contracts of $140,000 call options on September 24. Investors gave up the gains from potential price increases in exchange for higher net profits at the current level. .

Bitcoin options profit and loss forecast.Source: Derbit Position Generator

Note how the same result of $40,000 now brings a gain of 0.464 BTC, and any price level above $26,850 will produce a positive result. However, due to the super call option, if the transaction price of Bitcoin exceeds $68,170 on July 30, the transaction will also generate negative returns.

Therefore, analyzing those super call options alone cannot always clearly understand investors’ intentions.

Total open positions in Bitcoin options: Source: Bybt

There are currently 24,625 Bitcoin call option contracts with a price of US$100,000 or higher, which is equivalent to an open interest of US$910 million.

Of course, this sounds a lot, but the current market value of these hypercall options is $15.4 million. For example, a call option with a strike price of $120,000 on December 31 is worth $1,500.

In comparison, the $30,000 protective put on July 30 was worth $2,700. Therefore, one should not only focus on open positions, but should take into account the actual cost of each option.

These fancy $300,000 bitcoin call options made headlines, but they do not necessarily reflect the expectations of real investors.

For Bitcoin holders, it makes sense to sell call options of $100,000 and above and charge a premium. The worst-case scenario is that one person will be sold for $100,000 in December, which does not sound like a bad investment at all.

The views and opinions expressed here are only Author Does not necessarily reflect the views of Cointelegraph. Every investment and trading action involves risks. When making a decision, you should conduct your own research.