The $ 3,000 drop in the bitcoin price on Monday did not force large investors to change their behavior in the options market, confirming their confidence in the long-term prospects of the cryptocurrency.
“We do not see any signs of long-term hedging by institutions yet,” Deribit said. “In fact, funds continue to take advantage of the June-December expiration and strike below $ 40,000.”
3) But whereas Skew has seen near-term action, there is still an absence of any institutional longer-term hedging. In fact, Funds continue (low volumes) to take advantage of selling Jun-Dec <+40k Put strikes. This flow has pressured longer-term IV, while fronts still trade 2-way. pic.twitter.com/OHrRNF4Twp
— Deribit Insights (@DeribitInsights) February 15, 2021
In other words, these investors are selling bearish bets, the profitable execution of which would require the buyer to find the bitcoin price below $ 40,000. The sellers of such options expect the bitcoin price to stay below $ 40,000, at least for a long time.
According to Deribit, implied volatility (IV) has not shown an upward trend amid today’s move, speaking of “comfort and consolidation” in the $ 45,000 – $ 50,000 range:
“The strategy for selling puts has a twofold structure: collecting premiums that increase with volatility and confirming that traders don’t anticipate a crash before expiration.”
The six-month put-call divergence, reflecting the ratio of the value of bearish rates to bullish rates, remains in the negative zone, supporting the position of analysts at Deribit. The three-month reading is also holding below zero and confirms the bullish expectations.
If institutions were to buy long-term puts with a view to deeper declines, the six-month ratio would begin to rise into positive territory. Implied volatility would have increased too. Six-month implied volatility has dipped from 104.6% to 99.6% over the past 24 hours, while the three-month and monthly numbers have followed the same trajectory.
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