Bullish Bitcoin Bets Rise as Implied Volatility Slides

Bitcoin

(BTC)
options
now
look
cheap
and
some
traders
are
taking
advantage
of
the
same
to
raise
bullish
bets.

Options
are
derivative
contracts
that
give
the
purchaser
the
right
to
buy
or
sell
the
underlying
asset
at
a
predetermined
price
at
a
later
date.
A
call
gives
the
right
to
buy
and
allows
traders
to
profit
from
or
hedge
against
price
rallies,
whereas
a
put
option
does
the
opposite.

Traders
consider
options
cheap
when
implied
volatility,
one
of
the
key
determinants
of
options
prices,
slides
below
its
long-term
average
or
under
the
asset’s
realized
volatility.
Implied
volatility
is
the
one
standard
deviation
range
of
the
expected
movement
of
the
underlying
asset’s
price
over
a
year
and
tends
to
be
mean-reverting.
Realized
volatility
is
the
price
movement
that
has
already
happened.

Bitcoin’s
implied
volatility
(IV)

peaked
with
the
launch
of
spot
ETFs
in
the
U.S.
last
week
and
has
dropped
below
the
realized
volatility,
stoking
demand
for
calls
at
strikes
$45,000
and
$46,000
during
Thursday’s
North
American
trading
hours,
according
to
over-the-counter
institutional
cryptocurrency
trading
network
Paradigm.

“We
saw
a
large
buyer
of
Feb
$44k
straddles
and
some
outright
call
buying
in
the
$45k
/$46k
strikes,”
Paradigm
said
in
a
Telegram
broadcast.
“BTC
implied
volatility
now
trades
well
under-realized
volatility,
so
we
are
not
surprised
to
see
Paradigm
customers
playing
for
a
sharp
rally
back
in
spot
and
vol.”

The
word
outright
call
buying
implies
that
calls
purchased
were
likely
standalone
trades,
betting
on
renewed
upside
price
volatility
in
bitcoin
and
not
a
part
of
a
complex
strategy.
Since
early
2023,
bitcoin’s
price
and
implied
volatility
have
been
mostly

positively
correlated.

A

straddle
is
a
non-directional
strategy
involving
the
simultaneous
purchase
of
call
and
put
options
at
the
same
strike
price.
Its
purpose
is
to
profit
from
an
expected
spike
in
implied
volatility
and
the
resulting
rise
in
options
prices.

Bitcoin
has
dropped
over
15%
since
the
ETF
debuted
on
Jan.
11,
with
prices
briefly
falling
below
$41,000
late
Thursday.