Bitcoin Traders Expect Volatility as Options Expire

Key Takeaways

  • Bitcoin’s price dropped below $30,000 yesterday, raising concerns of further price volatility.
  • Options traders bought put orders at strike prices of $30,000 and $28,000 to hedge against further short-term downfall.
  • Market data shows heightened volatility expectations ahead of options volume expirations worth $3.5 billion next week.

Bitcoin traders are preparing for an extended short-term correction, as options contracts of 118,000 BTC ($3.5 billion) expire on Jan. 29.

Bitcoin Price Volatility Ahead

Bitcoin’s price fell by a record percentage of 13.1% on Thursday. The price carnage led the coin’s value to fall to $28,800. 

According to options market data, volatility is expected to remain high until next Friday, with the largest volume of options of $3.5 billion notional volume expiring that day. 

The implied volatility of Bitcoin, which represents the market’s expectations for volatility, is near record highs of 6.2%levels not seen since the  COVID-19-related crash in March. 

Higher levels of implied volatility also correspond to costly premiums for options contracts.

Deribit, which is responsible for 85% of options trading, has seen a high volume of put orders at strike prices of $31,000 and $28,000 since BTC plummeted yesterday. This suggests that traders are reducing their short-term risk against further downfall. 

Notably, 467 contracts for call options were also picked up at a strike price of $72,000. The above trade may represent a hedging order against short exposure. More likely, it represents the opening of long interest after spot liquidation. 

The maximum pain level, where both call and put buyers incur maximum loss, is at $28,000. 

Disclosure: The author held Bitcoin at the time of publication. 

The information on or accessed through this website is obtained from independent sources we believe to be accurate and reliable, but Decentral Media, Inc. makes no representation or warranty as to the timeliness, completeness, or accuracy of any information on or accessed through this website. Decentral Media, Inc. is not an investment advisor. We do not give personalized investment advice or other financial advice. The information on this website is subject to change without notice. Some or all of the information on this website may become outdated, or it may be or become incomplete or inaccurate. We may, but are not obligated to, update any outdated, incomplete, or inaccurate information.

You should never make an investment decision on an ICO, IEO, or other investment based on the information on this website, and you should never interpret or otherwise rely on any of the information on this website as investment advice. We strongly recommend that you consult a licensed investment advisor or other qualified financial professional if you are seeking investment advice on an ICO, IEO, or other investment. We do not accept compensation in any form for analyzing or reporting on any ICO, IEO, cryptocurrency, currency, tokenized sales, securities, or commodities.

See full terms and conditions.

Source: Read Full Article