Daily volumes for bitcoin options have hit lifetime highs on crypto derivatives exchange Deribit due to increased activity in deep “out-of-the-money” (OTM) call options, or bullish bets.
The biggest cryptocurrency exchange by options volume has traded a record 47,000 bitcoin options contract in the past 24 hours with a notional value of more than $500 million. Also, the exchange registered the largest single trade of 8,000 contracts.
Call options expiring in January 2021 at strikes of $36,000 and $32,000 have contributed more than 40% of the total trading volume.
According to data source Skew, the $36,000 call option has seen 16,078 contracts change hands today, while the $32,000 call has registered a volume of 4,000 contracts.
“The originator(s) of these trades expects BTC to trade above the strike levels [$36,000] by the end of January 2020 and is willing to back this expectation with significant volume,” Luuk Strijers, CCO of Deribit, told CoinDesk in a Telegram chat.
However, the idea of bitcoin rising to levels above $32,000/$36,000 by the end of January appears somewhat farfetched, given the options market is currently assigning only a 14% probability of prices challenging record highs by the end of the first quarter.
It could be a volatility play. Trader(s) who bought call options at $36,000 and $32,000 may be anticipating a pickup in volatility before the January expiry. Volatility has a positive impact on option prices.
So far Friday, the highest volume has been seen in $36,000 calls expiring in January.
A call option gives the investor the right, but not the obligation, to buy the underlying asset at a predetermined price on or before a specific date. Meanwhile, a put option represents a right to sell.