Ethereum Options Traders Expect the Price of ETH to Hit $880

Since November, the price of Ether has gained 88%. This increase astonished even the most optimistic investors, as the significant altcoin secured an annual high of $750. 

Aside from the expected CME ETH futures launch scheduled for February 8, the phenomenal growth of total locked value (TLV) in decentralized finance protocols also played a role. 

Investors are even more sure that Eth2 has been a success, even though the real potential for implementation delays and hurdles.

Another possible bullish factor is the recent 2-year low in ETH miners’ balances. This certainly alleviates potential selling pressure and opens room for further bullish continuation.

Over the past three months, open interest in Ether options increased 150% to a total of $880 million. This incredible build-up occurred when the cryptocurrency broke through the $700 resistance and hit its highest price since mid-May 2018.

The sell/buy ratio is now bullish

A trader can define the overall market sentiment by measuring whether there is more activity through call or put options. Usually, call options are used in bullish strategies, while put options are used for neutral or bearish strategies.

Despite the recent price rise, the sell/buy ratio has dropped considerably. This move indicates that more bullish call options have been dominating volumes. One should expect the exact opposite when traders take their profits or prepare for a possible drop.

That’s a striking contrast to the 0.94 level two weeks ago, which indicated that put options were well balanced with neutral to bullish calls.

The probabilities of current option trades are calculated according to the Black-Scholes model. The Deribit exchange presents this information as ‘ delta’. Simply put, these are the percentage-based probabilities for each strike or strike price.

Based on the data above, the $880 price for January 29 has a 34% chance of happening. Meanwhile, the $960 most traded price has a 25% chance based on the option pricing model.

Keep in mind that the statistical model tends to be too conservative, as even the price of $720 has a 59% probability.

March expiration is also extremely bullish

With 86 days from the expiration of March 2021, the odds of the Ether price breaking above $880 are even higher.

For now, the bulls appear to be in full control. While there is always the possibility of a correction in Ether’s price, it is unlikely to be strong enough to wreak havoc as the market shows no signs of excessive optimism.


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