Bitcoin options data shows sub-$17K BTC price gives bears a $200M payday on Friday

1 year ago

Bitcoin (BTC) crashed beneath $16,000 connected Nov. 9, driving the terms to its lowest level successful 2 years. The 2-day correction totaled a 27% downtrend and wiped retired $352 cardinal worthy of leverage agelong (buy) futures contracts.

To date, Bitcoin terms is 65% down for 2022, but it's indispensable to comparison its terms enactment against the world's biggest tech companies. For instance, Meta Platforms (META) is down 70% year-to-date, and Snap Inc. (SNAP) has dropped 80%. Furthermore, CloudFare (NET) mislaid 71% successful 2022, followed by Roblox Corporation (RBLX) and Snapchat (SNAP), some down 70%.

Inflationary unit and fearfulness of a planetary recession person driven investors distant from riskier assets. This protective question has caused the U.S. Treasuries' 5-year output to scope 4.33% earlier successful November, its highest level successful 15 years. Investors request a higher premium to clasp authorities debt, signaling a deficiency of assurance successful the Central Bank's quality to curb inflation.

Contagion risks from FTX and Alameda Research's insolvency are the astir pressing issues. The trading radical managed aggregate cryptocurrency task funds and was the second-largest trading speech for Bitcoin derivatives.

Bulls were overly optimistic and volition endure the consequences

The unfastened involvement for the Nov. 11 options expiry is $710 million, but the existent fig volition beryllium little since bulls were ill-prepared for prices beneath $19,000. These traders were overconfident aft Bitcoin sustained supra $20,000 for astir 2 weeks.

The 0.83 call-to-put ratio reflects the imbalance betwixt the $320 cardinal telephone (buy) unfastened involvement and the $390 cardinal enactment (sell) options. Currently, Bitcoin stands adjacent $17,500, meaning astir bullish bets volition apt go worthless.

If Bitcoin's terms remains beneath $18,000 astatine 8:00 americium UTC connected Nov. 11, lone $45 cardinal worthy of these telephone (buy) options volition beryllium available. This quality happens due to the fact that the close to bargain Bitcoin astatine $18,000 oregon $19,000 is useless if BTC trades beneath that level connected expiry.

Bears purpose for sub-$17k to unafraid a $200 cardinal profit

Below are the 3 astir apt scenarios based connected the existent terms action. The fig of options contracts disposable connected Nov. 11 for telephone (bull) and enactment (bear) instruments varies, depending connected the expiry price. The imbalance favoring each broadside constitutes the theoretical profit:

Between $16,000 and $18,000: 1,300 calls vs. 12,900 puts. Bears dominate, profiting $200 million.
Between $18,000 and $19,000: 2,500 calls vs. 10,200 puts. The nett effect favors the enactment (bear) instruments by $140 million.
Between $19,000 and $20,000: 3,600 calls vs. 5,900 puts. The nett effect favors the enactment (bear) instruments by $40 million.

This crude estimation considers the telephone options utilized successful bullish bets and the enactment options exclusively successful neutral-to-bearish trades. Even so, this oversimplification disregards much analyzable concern strategies.

For example, a trader could person sold a telephone option, efficaciously gaining antagonistic vulnerability to Bitcoin supra a circumstantial price, but unfortunately, there's nary casual mode to estimation this effect.

Bulls astir apt person little borderline to enactment the price

Bitcoin bulls request to propulsion the terms supra $19,000 connected Friday to debar a imaginable $140 cardinal loss. On the different hand, the bears' best-case script requires a flimsy propulsion beneath $17,000 to maximize their gains.

Bitcoin bulls conscionable had $352 cardinal leverage agelong positions liquidated successful 2 days, truthful they mightiness person little borderline required to enactment the price. In different words, bears person a caput commencement to pin BTC beneath $17,000 up of the play options expiry.

The views and opinions expressed present are solely those of the writer and bash not needfully bespeak the views of Cointelegraph.com. Every concern and trading determination involves risk, you should behaviour your ain probe erstwhile making a decision.

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