27. November 2020

Open interest set a record $2.9 billion in Bitcoin options after BTC’s rally to $14.259

Open interest in Bitcoin options reached a new all-time high of USD 2.9 billion, indicating that professional traders are still bullish on the BTC price.

Open interest in Bitcoin options contracts (BTC) reached a new all-time high of $2.9 billion. Interestingly, this feat occurred just five days after the October expiration, which settled USD 400 million in options.

In the last six months, the options market has tripled, making investors more curious about the possible impact that upcoming expirations will have on the price of Bitcoin.

Data from Cointelegraph and Digital Assets Data also show that Bitcoin’s monthly trading volume and BTC futures volume has been increasing since the end of October.

When looking at options, the 25% delta slope is the most relevant indicator. This indicator compares similar call and put options side by side.

This indicator will become negative when the premium of put options is higher than that of similarly risky call options. A negative slope translates into a higher cost of protection downwards, indicating an upward trend.

The opposite occurs when market makers are bearish, causing the indicator of the 25% delta slope to enter positive territory.

Fluctuations between -10% (slightly upward) and +10% (slightly downward) are considered normal. This has not been the case since October 19, when Bitcoin Revolution surpassed the USD 11,600 level and never looked back.

This indicator is the most substantial evidence a trader interested in derivatives needs to recognize current Bitcoin option sentiment.

You should be aware of the bid/ask ratio for further confirmation

To further investigate how these instruments are being used in traders‘ strategies, one must be aware of the buying and selling relationship. Call options are generally used in neutral and bullish strategies, while put options are the opposite.

By analysing the proportion of open interest between call and put options, it is possible to estimate in general terms how bearish or bullish traders are.

The open interest of put options has lagged behind the more bullish call options by 30%. After the expiry of October, this gap widened when the indicator reached its lowest level in 3 months.

Based on the current conditions shown by the tilt indicator and the proportion of call and put options, there is little reason to be concerned about the growing open interest in options.

The market has been signalling bullish intentions and the liquid derivatives markets are allowing the big players to hedge and enter the spot market.

From the perspective of BTC options, everything is clear for the current uptrend to continue.

The views and opinions expressed here are those of the author alone and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk, you should conduct your own research when making a decision.