Notably, bullish currents hit the Ether options market early Monday, suggesting hopes of a rebound rally before the end of the year.
In the over-the-counter desk paradigm, which is focused on institutions, 18,500 contracts for the call option of USD 4,400 and 14,000 contracts of the call option of USD 4,200 changed hands during the Asian hours. These December 31st expiring trades were executed on Paradigm and posted on Deribit, the leading exchange for cryptocurrency options by volume and open interest.
A call option gives the buyer the right, but not the obligation, to buy the underlying asset on or before a specific date at a predetermined price. A call buyer is implicitly bullish about the underlying asset.
While the main use case of options is to protect spot or futures market exposure from unexpected moves up or down, speculators sometimes bet on the underlying asset by simply buying calls or puts.
“The two trades were traded live and seem like a big directional bet for a year-end move,” Patrick Chu, director of institutional sales and trading at Paradigm, told CoinDesk.
In theory, the $ 4,400 call is a bet that Ether would settle above that level on December 31st. However, buyers can settle positions before expiration if Ether creates a rapid move up, adding value to bullish bets.
Note that calls out of the money (OTM) for strikes above the current market price (CMP) of the underlying are relatively cheap compared to strikes at or below the CMP and tend to increase significantly in value if they rise suddenly. Hence, traders often record OTM calls to generate oversized profits.
Despite significant buying activity on the $ 4,200 and $ 4,400 calls, the options market as a whole is still signaling caution.
According to data from crypto derivatives research firm Skew, the weeklong, one-, three-, and six-month put-call skews are positive, a sign that puts or downside bets generate higher prices or demand than calls.
Ether is currently trading near the $ 3,800 mark, down 3% from the day. The token that powers Ethereum’s blockchain appears to have gained acceptance below a five-month bullish trendline.
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