Bitcoin’s Option Market Is Now Skewed Bullish

Omkar Godbole

Updated 31 July 2020 at 3:39 pm·2-min read

Bitcoin’s price jumped to a fresh 11-month high on Friday, with the options market betting on a sustained bull move.

The top cryptocurrency by market cap rose to a high of $11,467 during the U.S. trading hours, surpassing the previous multi-high month high of $11,394 reached on Monday.
Bitcoin has rallied 24% in July and looks overbought as per the 14-day Relative Strength Index, a widely tracked technical indicator.
Options market data shows sentiment is quite bullish. Options are derivative contracts that give the purchases the right but not the obligation to buy or sell the underlying asset at a predetermined price on or before a specific date. A call option represents the right to buy and the put options gives the buyer the right to sell.
The one-, three- and six-month put-call skews, which measure the price of puts relative to that of calls, are negative. This is a sign calls, or bullish bets, are drawing higher value than puts, or bearish bets.

Investors appear to be selling more put options and buying call options because the put-call open interest ratio that measures the number of put options (or bearish bets) open against calls (or bullish bets) has risen to a two-month high of 0.63, according to data source Skew.

The put-call open interest ratio looks to have risen from 0.50 to 0.63 this week due to greater selling in put options.

With the combination of negative skews and a rising put-call open interest ratio, bitcoin’s latest move above $10,000 looks like it can be sustained.

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