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Institutional traders are betting that bitcoin will rise to $79,300 by the end of November. This bullish sentiment is evident in recent trading activities on the Chicago Mercantile Exchange (CME), where bitcoin options have seen some of their highest trading volumes ahead of the US presidential election.
Will bitcoin surpass $79,300?
Joshua Lim, co-founder of Arbelos Markets, a trading company that provides liquidity to cryptocurrency derivatives markets,x.com/joshua_j_lim/status/1851644268445659313″ target=”_blank” rel=”nofollow”>shared ideas about x about these notable operations. “CME bitcoin options just experienced some of the highest volume days in their history, ahead of the US election,” Lim said.
He highlighted two substantial transactions that occurred last week. On Friday the 25th, traders bought 1,875 units of bitcoin from the $70,000 strike calls on November 29. In options trading, a call option gives the buyer the right, but not the obligation, to purchase an asset at a specific strike price before the option expires. In this case, the strike price is $70,000, meaning buyers are betting that bitcoin will surpass this price by the end of November. Lim detailed that at the time of the exchange, “$8.3 million in premium, $147,000 in vega, $65 million in delta were paid.”
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Then, on Tuesday the 29th, another major trade occurred with the purchase of 3,050 units of bitcoin from the $85,000 strike calls on November 29, where the strike price is $85,000. Lim noted that “$4.6 million premium, $173,000 vega and $42 million delta were paid” at the time of the transaction.
The amounts of $8.3 million and $4.6 million indicate substantial investment, reflecting strong confidence in bitcoin's potential rise. The high vega suggests that traders expect significant volatility, which could be massive around the US elections. Delta represents how much the option price is expected to change with a $1 change in the price of the underlying asset. The high delta values of $65 million and $42 million imply substantial exposure to bitcoin price movements.
The total face value of these positions (the total value of the underlying assets represented by the options) is approximately $350 million. Lim noted that this is “big even in the context of Deribit,” referring to the world's largest crypto options exchange.
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The breakeven point for these positions is just below $79,300. This means that for traders to start making profits, the price of bitcoin must exceed this level on the option expiration date. This price represents approximately a 16% increase from the price of bitcoin when these trades were executed.
“Very optimistic positioning going into the election, and it's great to see institutions growing like this in CME,” Lim said. He added: “Perhaps it is a good sign that there is and will be increasing liquidity in the crypto derivatives markets as the asset class matures.”
The timing of these operations is particularly noteworthy. With the US presidential election imminent, market volatility is expected to increase, which could impact the entire bitcoin and cryptocurrency market. Overall, most experts believe that a Trump victory is bullish for the btc price.
At the time of publication, btc was trading at $72,382.
Featured image created with DALL.E, chart from TradingView.com
