Bitcoin put-call options ratio a bullish indicator for early 2024, says Deribit
There has been an increasing number of outstanding calls compared to puts in bitcoin options open interest, according to data from the Deribit derivatives exchange.
This indicates investors anticipate the digital asset’s price will appreciate in the early months of 2024, according to Deribit Chief Commercial Officer Luuk Strijers.
“The bitcoin put-call ratio has been fluctuating between 0.4 and 0.5 this year. We’ve observed a declining ratio for longer-dated expiries, which suggests that clients are using calls more frequently for positioning toward the March and June 2024 expiries. This trend indicates a longer-term bullish sentiment in the market, with a growing number of calls versus puts outstanding,” Strijers told The Block.
A put-call options ratio below one indicates that the call volume exceeds the put volume, signifying bullish sentiment in the market. According to data from The Block’s Data Dashboard, today’s put-call ratio on Deribit has fallen to 0.43.
The analysis from Deribit concurs with the options analysis from GreeksLive. “Looking at the options data, we can see that the put-call ratio is low, suggesting that the main trades this week have been centred on calls,” GreeksLive posted on X.com.
The GreeksLive analysis added that options traders are now betting on a “rise focused on January spot ETF approvals.”
Crypto derivatives activity increasing
According to Strijers, November has been one of the most active months for Deribit. He added that there has been an uptick in activity across the whole crypto derivatives market. “This heightened activity is reflected or caused by increased DVOL (implied volatility) levels, which in turn have driven opportunities and overall market volumes,” Strijers said.
A substantial amount of open interest is anticipated leading up to the upcoming end-of-month, quarter, and year options expiry date on December 29, he said. “As per current stats $5.7 billion in bitcoin options notional open interest and $2.7 billion in ether options will expire at the end of December.”
Options are derivative contracts that give a trader the right but not the obligation to buy or sell the underlying asset at a predetermined price on or before a specific date. A call option gives the right to buy and a put offers the right to sell. It is assumed that a trader who buys call options is implicitly bullish on the market, while a put buyer is bearish.