Important takeouts:
The diagonal and butterfly spread benefits from nearly $160,000 in BTC.
The $200,000 year-end call option suggests a potential profit of less than 3%.
Bitcoin (BTC) traders are preparing for the expiration date of the year-end $8.8 billion option scheduled for UTC at 8am on December 26th. When the price exceeds $200,000, Bitcoin options are active over $1 billion. But does that indicate that traders are expecting a 72% rally?
Calls dominate, but are used to bitcoin under $120,000
Currently, the total open interest for call (purchase) options is $6.45 billion, but there is a $2.36 billion option trail. This data shows a clear advantage of call options, but bearish traders look somewhat comfortable as Bitcoin remains under $120,000.
Some call options have a strike price of over $170,000 and will be worthless unless Bitcoin gets 46% from its current level. In fact, if BTC trades nearly $116,500 on December 26th, only $878 million worth of open call interest will retain its value at the expiration date.
Professional traders often use very bullish call options as part of strategies that do not necessarily rely on 70% year-end rally.
One such strategy, Call Agonagonal Spread, will buy a December call of $120,000 and sell a $200,000 call with an early expiration date, typically in October.
This setup will make the most profitable if BTC is above $146,000 by October 31st, and will be valued for long-term calls while not worth the short-term call.
However, BTC prices can be over $200,000, which can actually undermine this strategy. The biggest potential loss is BTC 0.005 (approximately $585 at current price), while the maximum gain is BTC 0.0665 (approximately $7,750).
Another example is “reverse call butterfly.” This consists of buying a $140,000 call, selling a $160,000 call for $2, and buying a $200,000 call for one $200,000 call.
This position benefits most when BTC landed near $160,000 on December 26th and netted BTC 0.112 (approximately $13,050). However, if BTC rises above $178,500, the losses begin to occur. Still, a $200,000 call can help limit your potential losses. In this case, the maximum loss is 0.109 BTC, or about $12,700.
The $900 million Bitcoin put option aims at $50,000 to $80,000
A considerable open interest in the $200,000 call option does not necessarily mean that traders expect Bitcoin to reach that level. In fact, put options with a December expiration date of nearly $900 million are positioned between $50,000 and $80,000, indicating that bearish bets are also playing, even if they have low odds.
To explain market sentiment, the price of a $140,000 call currently exceeds BTC 0.051 (approximately $5,940), meaning a 21% chance based on the Black Suchuls model. Meanwhile, a $200,000 call transaction at BTC 0.007 (approximately $814) reflects an implicit probability of less than 3%.
These aggressive strike prices may grab the headlines, but the data tells a different story. Traders are not betting farms at 72% meetings. Instead, they use far calls of money as a tool within a structured strategy that offers limited risk and leverages upside down.
However, unlike Bitcoin options, the chances of BTC prices reaching $200,000 this year are 13%.
This article is for general informational purposes and is not intended to be considered legal or investment advice, and should not be done. The views, thoughts and opinions expressed here are the authors alone and do not necessarily reflect or express Cointregraph’s views and opinions.
