The open interest rate on Bitcoin Options (BTC) is only 5% lower than the peak time, but roughly half of that will close this coming September.

While the present value of options of $ 1.9 billion indicates that the market is healthy, it is still not unusual to see such a large concentration of short-term options.

By itself, the current numbers should not be viewed as bullish or bearish, but proper volume, open interest rates and liquidity are needed to allow the big players to participate in such markets.

Notice how BTC open interest has just broken the $ 2 billion barrier. By chance, the same level was reached in the last two outlets. It is normal (actually expected) that this number will decrease after every calculation in a calendar month.

There is no magic level to maintain, but spreading options over the course of months allows for more sophisticated trading strategies.

Most importantly, the presence of liquid options and futures markets helps in maintaining spot (regular) trading volumes.

Risk aversion is currently low
In order to assess whether traders are paying large premiums for Bitcoin options, the implied volatility needs to be analyzed. Any major unexpected price movement will cause a sharp rise in the index, regardless of whether the change is positive or negative.

Volatility is often referred to as a fear indicator, as it measures the average premium paid in the options market. Often any sudden price changes cause market makers to avoid risk and therefore require a higher premium for options trading.

The above chart clearly shows major gains in mid-March when BTC slipped to its annual low of $ 3,637 to quickly return to the $ 5,000 level. This unusual move caused Bitcoin’s volatility to reach its highest level in two years.

This is in contrast to the past 10 days, when the implied volatility of BTC for 3 months decreased from 76% to 63%. Although the rationale behind such relatively low premiums on option, requires further analysis, although it is not surprising.

Over the past six months, there has been an unusually large correlation between BTC and US tech stocks. While cause and effect cannot be found, bitcoin traders who chose to close may have lost hope.

The chart above shows an average correlation of 80% over the past six months. Whatever the explanation for this correlation, it partly explains the recent decline in Bitcoin’s volatility.

The longer the corresponding close-out period, the less motivated traders will be to invest in strong Bitcoin price movements. One of the most important indicators of this is the uncertainty of traders, and it can lead to greater price fluctuations.

An unusual focus for short-term options
Most of the relevant Bitcoin options expire on the last Friday of every month, and it is expected that there will be some focus on the shorter ones due to the covered trade.

This strategy consists of buying BTC in the spot (regular) or futures market and selling call options at the same time.

The covered call is akin to interest rate trading with the aim of obtaining large option bonuses in the BTC markets. Ultimately, this trader will liquidate his positions in the Forex, Futures and Options markets.

The unusual situation illustrated in the chart above shows that 53% of options in the 2020 calendar are due on Friday, September 25.

In comparison, this is the same open interest rates for ETH options that expire in September and December.

There can be no logical explanation as to why BTC options are so focused, but a similar phenomenon emerged in June, resulting in a $ 900 million cut in BTC options.

There are no signs of weakness in the options markets at the moment, but since Ether options are worth $ 450 million, a figure below $ 1.5 billion would definitely not be desirable for Bitcoin.

Source: CoinTelegraph