Revival of Animal Spirits: Bitcoin Traders Lock $20M in $200K Call Option
Deribit, a leading crypto options exchange, has recently seen a surge of activity in a $200,000 strike bitcoin call option, demonstrating a renewed enthusiasm in the market. This interest is reminiscent of the animal spirits observed in 2021, with investors placing bets that would pay off if the cryptocurrency’s price tripled in the coming months.
The open interest in options has reached record highs alongside bitcoin’s price rally. On Friday, the notional open interest for the $200,000 call option exceeded $20 million, nearly three times the current market rate for bitcoin, which stands at $67,000.
Of the total amount, $14.6 million is locked in the $200,000 call option expiring on December 27, while the remaining funds are concentrated in June and September expiry strikes, according to Deribit Metrics.
By purchasing the deep out-of-the-money call at the $200,000 strike expiring on December 31, investors are essentially betting that bitcoin’s price will exceed this level by the end of the year. Call options grant the right to buy the underlying asset at a specified price on a future date, indicating a bullish sentiment among buyers.
The popularity of the $200,000 strike call during bitcoin’s previous surge above $60,000 in 2021 fuels the current interest in this deep out-of-the-money option. This aligns with the belief that BTC’s upcoming halving-induced supply reduction will further tip the supply-demand balance in favor of the bulls, potentially driving prices into the six-figure range.
Wall Street’s increasing acceptance of U.S.-based spot bitcoin exchange-traded funds has contributed to a supply-demand balance of 1:10. As a result, bitcoin recently reached new record highs above $69,000, reflecting a year-to-date gain of 59.7%. The broader CoinDesk 20 Index has also experienced a 45% increase.
This rally has stimulated overall activity in the options market. The total open interest in bitcoin options on Deribit has surged to a record $20.4 billion, surpassing the previous peak of $14.36 billion in October 2021. Ether (ETH) options have also reached a lifetime high of $11.66 billion in open interest.
Deep out-of-the-money calls are less expensive than options at strikes closer to or below the current market rate. Consequently, outright purchases of these deep OTM calls are often equated to purchasing lottery tickets. While the loss is limited to the premium paid for the option, potential profits can be substantial if the market surpasses the strike price before expiration.