Bitcoin Options edge to ‘buy’ as expiry closes out ‘sell’ positions

After falling from $7,700 to $3,800 in less than 24-hours, Bitcoin has held strong. In the two weeks since its plummet, the cryptocurrency has consistently traded over the $6,000 mark, with its press time price being just over $6,600. Now, consistent momentum is changing the tune in the market as traders are looking to buy, rather than sell.

Bitcoin Options, a tell-tale sign for the price movement of the spot market, is indicative of bullish traders. According to data from Skew markets, a large number of Options contracts are being traded with a bullish strike price, or a price that is over the current trading price.

Bitcoin Options volume current day | Source: skew

Volume from top Options exchanges like Deribit and OKEx suggested that four contracts of the top-5 are trading at a price over the traded price. In fact, the top-3 spots were taken by contracts trading at a price of $8,500, $7,000 and $7,500, respectively.

Further, the four bullish trading contracts were all marked with a call, or a right to buy option, with the only right to sell having a strike price of $6,500, marginally lower than the trading price.

This change in the price and types of options of these contracts has resulted in a change in the Put/Call ratio as well. From 25 March to 26 March, the ratio dropped from 1.05 to 0.65, indicating by conventional standards, an increase in call options or a decline in put options. Going by the volume of call to put options, the trend is likely the former.

Bitcoin Options Put/Call ratio | Source: skew

Earlier in the week, the trend was in stark contrast to what it is today. With over 50 percent of the outstanding Options contracts expiring today i.e. 27 March, and the price mildly recovering from a pullback below $6,000, the contracts were more sell than buy.

At the time, most contracts were trading with a strike price of $5,500, $5,000 and $4,500, respectively, considerably lower than the market price. Each of these contracts was expiring on 27 March, a short-term bearish sentiment that has since passed.

The Put/Call ratio back then showed a marginal increase from 0.58 to 0.88, underlining the bearish trend as the right to sell Options overtook the right to buy. Now, however, the bullish sentiment is back, as traders prefer buying Options over selling them, at prices higher than the current market price and with a short-term expiry.