Bitcoin options worth $10.86 billion expire on Deribit on Friday, and pricing shows traders paying a premium for downside protection. Most open positions sit in calls at strikes from $90,000 to $100,000.
Bitcoin options traders are paying up for protection. Puts are 10 volatility points pricier than calls on Deribit, after bitcoin dropped to as low as $79,300 earlier this week.
Skew tilts toward puts below $80,000
Jean-David Pequignot, chief commercial officer at Deribit, told CoinDesk that the break below $80,000 pushed BTC's front-end 25-delta skew heavily toward puts. A put option guards against a slide in the spot price, while calls let traders profit from rises.
Derivative traders typically quote option values in volatility rather than prices. The signs suggest demand is for insurance against declines rather than speculation on gains, according to CoinDesk. Pequignot added that bitcoin's short-dated options show a "pronounced smile" in implied volatility, with the downside particularly in demand.
$10.86 billion expires Friday
Bitcoin options worth $10.86 billion will expire on Deribit at 08:00 UTC on Friday. Ether options worth $783 million will also settle.
Most open bitcoin positions are stacked in calls at strikes from $90,000 to $100,000, which suggests traders positioned for a steep rise that did not materialize. These bets are now out of the money, or at a loss.
Implied volatility sits above realized
Deribit's BTC 30-day implied volatility index, DVOL, currently sits at 36, about five points above the 30-day realized volatility of 31. Recent price action near $80,000 has failed to establish much of a direction.
Pequignot said this positive Variance Risk Premium indicates that options are pricing in significant movements relative to recent realized chop.
Source: CoinDesk
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