How significant is the $900 million open interest in Bitcoin options over $100,000?

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Pro traders have purchased ultra-bullish $100,000–$200,000 Bitcoin options, but how certain are they that these objectives will be met?

Bitcoin (BTC) is on track to have its worst monthly performance in a decade, but some investors are taking advantage of the situation to purchase ultra-bullish long-term futures. There are presently over $900 million in call (buy) options aimed at $100,000 or above, but what are those investors looking for?

Options products can be used for a variety of purposes, including hedging (protection) and assisting people who bet on certain outcomes. For example, a trader may anticipate a period of decreased volatility in the immediate term but strong price oscillation at the end of 2021.

Most inexperienced traders fail to see that an investor may sell an ultra-bullish call (buy) option for September in order to increase returns on a short-term strategy, and hence do not anticipate it to be carried until the expiration date.

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Bitcoin option profit/loss estimate. Source: Deribit Position Builder

The graph above depicts the net outcome of selling a Bitcoin $40,000 July 30 put. If the price maintains above that level, the investor earns 0.189 BTC. Meanwhile, any conclusion less than $33,700 will result in a negative consequence. At $30,000, for example, the net loss is 0.144 BTC.

In the next scenario, the identical deal will take place, but the investor will additionally sell 40 contracts of the $140,000 call option on September 24. The investor foregoes possible price growth profits in exchange for a bigger net profit at current levels.

 

Bitcoin option profit/loss estimate. Source: Deribit Position Builder

Take note of how the same $40,000 result now offers a 0.464 BTC gain, and every price level above $26,850 provides a positive result. However, because of the extreme bullish calls, the trade will have a negative conclusion if Bitcoin trades over $68,170 on July 30.

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As a result, examining those ultra-bullish options individually does not necessarily offer a clear picture of investors’ intentions.

 

Aggregate Bitcoin options open interest: Source: Bybt

There are presently 24,625 Bitcoin call option contracts with a strike price of $100,000 or more, amounting to $910 million in open interest.

It may appear to be a large sum, but the current market value of these extremely optimistic options is $15.4 million. A December 31 call option with a strike price of $120,000, for example, is worth $1,500.

A $30,000 protective put option expiring on July 30 is worth $2,700. As a result, rather of relying just on open interest, one should consider the real cost of each choice.

While these showy $300,000 Bitcoin call options get a lot of attention, they don’t always represent genuine investor expectations.

It makes sense for Bitcoin holders to sell call options for $100,000 or more and collect the premium. Worst case scenario, one will sell for $100,000 in December, which does not sound like a terrible investment at all.

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