Open interest in bitcoin options contracts (BTC) hit a new high of $ 6.5 billion on December 17th, a tripling from the last 90 days and is indicative of the significant market growth over the past 6 months.

Investors should keep in mind that while an open interest of $ 6.5 billion is an impressive figure, this does not necessarily mean professional investors are optimistic or are reluctant to offer.

Call options give buyers the ability to influence them without the risk of liquidation. Meanwhile, put options are a great way to hedge against potential future sales. Thus, both metrics increase the overall open interest shown in the current figure.

A more interesting fact to analyze is that an alternate profile that expires within the next 30 days is very different from long-term profiles. Bitcoin’s 63% bull rally since November has definitely contributed to this distortion, as higher numbers of $ 22,000 have been infrequent.

Therefore, such a large open interest around the $ 16,000 strike can be explained by market levels ahead of the rally.

Notice how a decent volume after the last rally topped $ 24,000 and $ 28,000 for a total of 14,800 Bitcoin contracts. Unlike ultra-bullish options over $ 32,000, they are not cheap.

This means that someone actually paid $ 1,200 for the opportunity to receive $ 24,000 bitcoins on December 25, less than ten days after the expiration date. By comparison, that’s ten times the $ 32,000 call option.

While it is too early to understand how professional traders will be placed at the end of Friday, December 25th, the premiums paid on these options seem far too high in such a short period of time.

Longer-term options are more optimistic
A completely different picture arises when you focus solely on expiration times greater than 30 days that favor heavy calls. Unlike in the short term, they are not cheap, even if they charge 70% or more.

This time, the $ 36,000 hit dominated, followed by an incredibly optimistic $ 52,000. These options require 40% or more of the 52,900 BTC contracts, totaling $ 1.2 billion in open interest.

The largest open interest rate call position at $ 36,000 expires on January 29th. Those who have traded under $ 690 recently are not available to everyone.

Instead of measuring investor optimism by how high they buy long options, investors should switch to a divergence indicator. Keep in mind that ultra-high options are relatively cheap for 40-50 days from the end of the calendar on January 25th.

The divergence indicates that investors are less optimistic.
When analyzing alternatives, the most relevant calculation is the delta deviation from 30% to 20%. This indicator compares buy (buy) and sell (sell) options side by side.

A 10% delta deviation indicates that the calls are trading at a premium over the more bearish / neutral puts. On the other hand, negative divergence means a higher cost to defend against a downtrend, which indicates a downtrend.

According to the data above, they last showed bearish sentiment on November 26, when BTC fell 15%, testing the $ 16,200 level. This was followed by a period of strong optimism, when the deviation of the 30-20 delta exceeded 25%.

This indicator is the most important clue to understanding what a derivatives trader needs to know about the current sentiment for Bitcoin options. When it crosses 15, it reflects the concerns of arbitration agencies and professionals about potential price increases and is considered optimistic as a result.

As such, the latest revision points to 10 out of 15 when Bitcoin hit a consistent high of $ 23,888 in a healthy market where investors are still not overly optimistic.

Source: CoinTelegraph