Bullish Flows Push Bitcoin’s Put-Call Ratio To 2021 Low
Bitcoin’s put-call open position ratio fell to its lowest level this year due to increased activity in bullish calls or bets.
The ratio slipped to 0.51 on Monday, reaching its lowest level since Dec. 25 and extending the decline from a July high of 0.67, according to data provided by crypto derivatives research firm Skew show.
According to Skew’s Twitter feed, around 2,000 bitcoin call option contracts with an exercise price of $ 140,000 and an expiration date of December 31st changed hands on Sunday. Similar volume was seen on the December expiration call with a strike price of $ 200,000.
“All this calling activity has brought the buy-to-buy ratio to its lowest level since the start of the year,” Skew tweeted Monday. A call option gives its holder the right but not the obligation to buy the underlying asset at a predetermined price on or before a specific date. A call buyer essentially buys insurance against bullish movements by paying a premium to the seller. A put option gives the buyer the right to sell.
Data shared by OTC Paradigm and analytics firm Genesis Volatility shows investors bought August 6 expiration calls at $ 44,000 and simultaneously sold $ 50,000 calls, a so-called Bullish call spread, last week, pulling open sell call positions report down.
The bull call spread involves buying call options at, below or above the spot market price and selling an equal number of calls with the same expiration at a higher strike price.
It is a limited risk, limited return strategy designed to benefit from an increase in the underlying asset. Maximum profit is realized if the asset expires at or above the short call strike price, which is $ 50,000 in this case, on the day of settlement. The maximum loss is limited to the net premium paid when defining the strategy. It is obtained by subtracting the compensation received for the sale of the call of $ 50,000 from the premium paid for the purchase of the call of $ 44,000.
Traders also bought the September expiration call propagation at $ 64,000 – $ 124,000 in strikes last week. Other measures measuring implied volatility or the price differential between calls and puts also paint a bullish picture.
For the first time in nearly 10 weeks, short, medium and long-term put-call biases are showing negative values, a sign that calls are attracting higher demand or prices than puts.
Bitcoin is currently trading at nearly $ 38,500, which is a 1.7% drop on the day.