Academy Trading Ideas Article

New OKEx BTC Options Data Shows Traders Offset their Call Options After Thursday’s Drop

2020.06.12 Hunain Naseer

Bitcoin (BTC) price has been volatile this week, with the Fed’s announcement and the U.S. stock market making major headlines. Bitcoin rose from $9,750 to $10,000 after the FOMC meeting on Wednesday, June 10, and plummeted to $9,081 on Thursday, as per OKEx’s BTC Index Price, in-tandem with all global risky assets.

 As Bitcoin experiences increasing volatility, traders may turn towards derivatives markets to assess market sentiments and future expectations. In order to help traders seeking such insights, today, June 12, OKEx has unveiled trading data on its Bitcoin options products. In this analysis, we’ll discuss and interpret some of the available datasets.

bitcoin usd
OKEx BTC Index Price 1H chart. Source: OKEx

BTC Options Open Interest and Trading Volume

Open Interest (OI) of BTCUSD options has been growing consistently since May 19 and made a record high of 7,580.5 BTC on Thursday morning. Since then, OI dropped to 5553.9 as the weekly option expired on Friday. The OI is expected to accumulate again soon. 

At the time of writing, the options contract with the largest OI (392.4 BTC) is BTC-USD-0626-2000-P — a put option, expiring on June 26, with a $2,000 strike price. The option with the largest daily trading volume (119 BTC) is BTC-USD-0925-12000-C — a call option expiring on September 25, with a $12,000 strike price. 

These figures indicate that, overall, more traders are leaning towards a bullish view in the mid-long term, alongside a large proportion of hedging positions.

open interest trading volume btc options
Data Collection Time: 5/19 16:00 a.m. to 6/12 8:00 a.m. (UTC)

Open Interest reflects the total holdings of a specific asset in options contracts at a specific time. Trading Volume denotes the total number of traded options contracts within that time frame.

The sharp decline in OI each Friday is due to the expiration of weekly options.

BTC Options Open Interest and Trading Volume by Expiry

The majority of OI pertains to quarterly options contracts — 20200626 (expiring on June 26) with 1,766.4 BTC in calls and 1,459.5 BTC in puts. Options with shorter maturity dates tend to have a relatively more balanced call and put distribution while those with longer maturity dates are mostly traded out of the money (OTM).

Open Interest Put Call BTC Options
Data Collection Time: 5/19 16:00 a.m. to 6/12 8:00 a.m. (UTC)

This indicator shows both call and put open interests (value of currently active call or put options) and corresponding trading volumes for specific time periods.

BTC Options Call/Put Ratio

Compared to the beginning of June, the Call to Put Ratio has decreased from 1.95 to 1.57, indicating that the share of calls in the total OI is 61 percent as of today. The decline accompanied Thursday’s price drop for Bitcoin, and combined with the uptick in the Call to Put Ratio (Volume) on the same day, it indicates that traders offset their call options.

open interest ratios btc options
Data Collection Time: 5/19 16:00 a.m. to 6/12 8:00 a.m. (UTC)

This indicator shows the ratio of total open interest and total volume as compared between call and put options. A ratio of 1 is not an accurate starting point to measure market sentiment since there are, normally, more buyers for calls than puts.

Call/Put Ratio (OI) = open interest of call options on a given day/open interest of put options on the same day.

Call/Put Ratio (Volume) = volume of call options on a given day/volume of put options on the same day.

BTC Options Implied Volatility

1-month and 3-month Implied Volatility (IV) are stable around 69 percent and 72 percent respectively, but the spreads have narrowed.

implied volatility btc options contract
Data Collection Time: 6/7 8:00 a.m. to 6/12 8:00 a.m. (UTC)

This indicator shows the implied volatility corresponding with the mark price at specific times for different expiry terms. 

Implied Volatility reflects the expected future volatility of the underlying asset’s price. In statistical terms, it is the expected annual standard deviation of the underlying asset’s price in percentage points. Provided all other factors are equal, higher options premiums indicate higher implied volatility. 

BTC Options Implied Volatility Skew

According to the chart below, the 1-month IV skew is generally volatile, while the 3-month one is left-skewed and stabilizes with time, indicating that the mid-long term sentiment is relatively directionless.

IV Skew
Data Collection Time: 6/7 8:00 a.m. to 6/12 8:00 a.m. (UTC)

Volatility skew reflects how options contracts for a single underlying asset, with the same expiration but different strike prices, will have different implied volatility (IV) figures. The skew looks at the difference between the IV for in-the-money, out-of-the-money, and at-the-money options.

BTC Options Implied Volatility vs Index Historical Volatility

As shown in the chart below, Historical Volatility rose sharply on Thursday, then it began to fall slowly, but Implied Volatility did not change much.

historic volatility
Data Collection Time: 6/7 8:00 a.m. to 6/12 8:00 a.m. (UTC)

This indicator shows the implied volatility for the at-the-money options and the historical volatility for the corresponding index price. 

Periods when both these measures indicate high volatility generally tend to benefit options sellers, while low volatility readings benefit options buyers.

Options Cheat Sheet

Traders new to the options market may find it helpful to have a quick cheatsheet explaining the common terms, with even more information in our in-depth guide to Bitcoin derivatives.

  • Put is a right to sell an asset at a pre-determined price
  • Call is a right to purchase an asset at a pre-determined price

For call options:

  • ITM — in the money: Strike Price < Current Asset Price
  • ATM — at the money: Strike Price = Current Asset Price
  • OTM — out of the money: Strike Price > Current Asset Price

For put options:

  • ITM — in the money: Strike Price > Current Asset Price
  • ATM — at the money: Strike Price = Current Asset Price
  • OTM — out of the money: Strike Price < Current Asset Price


Disclaimer: This material should not be taken as the basis for making investment decisions, nor be construed as a recommendation to engage in investment transactions. Trading digital assets involve significant risk and can result in the loss of your invested capital. You should ensure that you fully understand the risk involved and take into consideration your level of experience, investment objectives and seek independent financial advice if necessary


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