The open interest in Ethereum (ETH) options increased fivefold over the last three months to USD 337 million.
Although this figure is very pale compared to the current $1.8 billion Bitcoin Options market (BTC), Ether’s options grew to the same size as the BTC options market approximately 15 months ago.
ETH options open interest in USD terms
Options are divided into two basic instruments: call options, used mainly for upward strategies, and put options, used mainly for downward operations.
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This is a very simple view, but it gives an overview of the expectations of professional traders, as large trades weigh more heavily on the index.
This sell/buy ratio touched 0.37 in mid-March, indicating that the open interest of put (bearish) options was 63% lower than call (bullish) options. This all changed after the fall of the crypto market on March 12, when the price of Ether collapsed by more than 40%.
Traders began building protective positions at an impressive pace, and the sell/buy ratio reached 1.04 in early June, indicating that put options had a higher open interest rate than call options.
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As Ether (ETH) failed to break the $250 level, open interest fell back a little to 0.84 in mid-July.
Interestingly, despite the recent 64% rally to the current $390 since July 20, option markets continue to add more bearish puts. This indicator should not be analyzed independently, as these Bitcoin Up options could be worth pennies if their odds are considered low.
Prices above USD 400 are not common
Another widely used indicator is the comparison of open interests above and below current market levels.
To reduce the impact of the $400 maturity concentration, open interest should be analyzed 6% below the current $390 Ether price and 6% above, thus excluding those levels.
There are currently 530K ETH options below the USD 370 expiry date, as opposed to 280K ETH options priced above USD 400. This indicates 65% of option prices regardless of call or put, below current market levels.
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Such an indicator could show that most traders did not expect such a strong move, although this does not necessarily translate into a downward trend.
With enough time, more trades should go through maturities above USD 400, and this ratio could be balanced out.