Bitcoin options boom raises fears of capped BTC upside

Key takeaways:

• Covered calls gained traction arsenic cash-and-carry returns collapsed, but information shows they are not structurally suppressing Bitcoin’s price.

• Stable put-to-call ratios and rising enactment request suggest hedging and output strategies coexist with bullish positioning.

As Bitcoin (BTC) terms entered a downtrend successful November, traders began forming theories astir wherefore organization inflows and firm accumulation failed to prolong terms levels supra $110,000.

One mentation often cited is the rising request for Bitcoin options, peculiarly those linked to the BlackRock iShares spot Bitcoin (IBIT) exchange-traded fund.

IBIT options unfastened interest. Source: OptionCharts.io

The aggregate Bitcoin options unfastened involvement climbed to $49 cardinal successful December 2025 from $39 cardinal successful December 2024, putting the covered telephone strategy nether person scrutiny.

Critics reason that by “renting out” their upside for a fee, ample investors person unintentionally created a ceiling that prevents Bitcoin from entering its adjacent parabolic phase. To recognize this argument, it helps to presumption a covered telephone arsenic a trade-off betwixt terms appreciation and dependable income.

In a covered telephone strategy, an capitalist who already owns Bitcoin sells a telephone (buy) enactment to different party. This gives the purchaser the close to acquisition that Bitcoin astatine a fixed price, specified arsenic $100,000 by a specified date. In return, the seller receives an upfront currency payment, akin to earning involvement connected a bond.

This options strategy differs from fixed income products due to the fact that the seller continues to clasp a volatile asset, adjacent though their imaginable upside is capped. If Bitcoin rallies to $120,000, the seller indispensable merchantability astatine $100,000, efficaciously missing the further gains.

Traders reason that this dynamic suppresses terms enactment due to the fact that nonrecreational dealers who acquisition these options often merchantability Bitcoin successful the spot marketplace to hedge their exposure, creating a persistent “sell wall” astir fashionable onslaught prices.

Options-based output replaced the collapsed currency and transportation trade

This displacement toward options-based output is simply a nonstop effect to the illness of the cash and carry trade, which involves selling BTC futures portion holding an equivalent presumption successful the spot market. 

BTC 2-month futures annualized premium. Source: laevitas.ch

For overmuch of precocious 2024, traders captured a dependable 10% to 15% premium. By February 2025, however, that premium had fallen beneath 10%, and by November it struggled to stay supra 5%.

In hunt of higher returns, funds rotated into covered calls, which offered much charismatic annualized yields of 12% to 18%. This modulation is evident successful IBIT options, wherever unfastened involvement jumped to $40 cardinal from $12 cardinal successful precocious 2024. Even so, the put-to-call ratio has stayed unchangeable beneath 60%.

IBIT options put-to-call ratio. Source: OptionCharts.io

If wide “suppressive” telephone selling were genuinely the ascendant force, this ratio would apt person collapsed arsenic the marketplace became saturated with telephone sellers. Instead, the equilibrium implies that for each yield-focused seller, determination is inactive a purchaser positioning for a breakout.

The put-to-call ratio suggests that portion immoderate participants are selling upside telephone options, a overmuch larger radical is purchasing enactment (sell) instruments arsenic extortion against a imaginable terms decline.

The caller antiaircraft stance is reflected successful the skew metric. While IBIT enactment options traded astatine a 2% discount successful precocious 2024, they present commercialized astatine a 5% premium. At the aforesaid time, implied volatility, the market’s measurement of expected turbulence, declined to 45% oregon little from May onward, down from 57% successful precocious 2024.

BTC options implied volatility. Source: laevitas.ch

Lower volatility reduces the premiums earned by sellers, meaning the inducement to deploy this alleged “suppressive” strategy has really weakened, adjacent arsenic full unfastened involvement has increased.

Arguing that covered calls are holding prices down makes small consciousness erstwhile the sellers of those telephone options basal to payment astir if prices emergence toward their people levels. Rather than acting arsenic a constraint, the options marketplace has go the superior venue wherever Bitcoin’s volatility is being monetized for yield.

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