Bitcoin option traders expect the price to reach $30,000 in Q4
Options are financial derivatives where two parties contractually agree to trade an asset at a stated price before a future date.
Glassnode data analyzed by CryptoSlate suggests options traders expect Bitcoin and Ethereum to move higher in Q4.
Bitcoin Implied Volatility
Implied volatility (IV) is a metric that measures market sentiment against the probability of changes in a particular asset’s price – often used to price options contracts. IV usually increases during market downturns and decreases during bullish market conditions.
It can be considered a proxy for market risk and is usually expressed in percentage terms and standard deviation over a specific time frame.
A standard deviation (SD) measures how spread out or distributed data is in relation to the mean. For example, within a normal distribution, 68% of the data fall within one standard deviation of the mean, 95% within two SDs, and 97.7% within three SDs.
IV follows expected price movements within one SD over a year. The calculation is further supplemented by defining IV for option contracts that expire in 1 week, 1 month, 3 months and 6 months from today.
The chart below shows that Bitcoin IV has since fallen from summer highs to stabilize and become less volatile in the second half of the year. Based on previous instances of falling IV, this could be a precursor to bullish conditions brewing in Q4.
Open interest
Open interest (OI) refers to the total number of outstanding derivative contracts, in this case options, that have not yet been settled.
A put is the right to sell a contract at a specified price before an expiration date. In comparison, calls are the right to buy a contract at a specified price before an expiration date.
The Bitcoin OI chart below shows strong puts at $10,000, $15,000 and $16,000. While traders have signaled an overwhelming amount of calls, amounting to over $1 billion in value, for BTC over 30,000.
The ratio of puts to calls suggests that traders expect Bitcoin to move higher, with $30,000 as the mode price target.
Meanwhile, Ethereum OI shows a similar pattern to Bitcoin as conversations dominate. $3,000 calls dwarf all other prices, both puts and calls.
