This article is available in Spanish.
Institutional traders are betting that Bitcoin will rise to $79,300 by the end of November. This bullish sentiment is clearly reflected in recent trading activity on the Chicago Mercantile Exchange (CME), where Bitcoin options have experienced some of their highest trading volumes ahead of the US presidential election.
Bitcoin Rises Above $79,300?
Joshua Lim, co-founder of Arbelos Markets – a trading firm that provides liquidity in the cryptocurrency derivatives markets –shared insights on X about these notable transactions. “CME Bitcoin options just had some of their biggest volume days ever ahead of the US elections,” Lim said.
He highlighted two substantial transactions that took place in the past week. On Friday the 25th, traders bought 1,875 Bitcoin units from the November 29 $70,000 strike calls. In options trading, a call option gives the buyer the right, but not the obligation, to purchase an asset at a specified strike price before the option expires. In this case, the strike price is $70,000, which means the buyers are betting that Bitcoin will exceed this price by the end of November. Lim explained that at the time of the transaction, “$8.3 million was paid in premium, $147,000 in vega, $65 million in delta.”
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Then, on Tuesday, November 29, another major trade took place with the purchase of 3,050 Bitcoin units from the $85,000 strike calls of November 29, with the strike price being $85,000. Lim noted that “$4.6 million was paid in premium, $173,000 in vega, $42 million in delta” at the time of the transaction.
The amounts of $8.3 million and $4.6 million indicate substantial investments, reflecting strong confidence in Bitcoin’s potential upside. The high vega suggests that traders expect significant volatility, which could be huge around the US elections. Delta indicates how much the option’s price is expected to change for a $1 change in the price of the underlying asset. High delta values of $65 million and $42 million imply substantial exposure to Bitcoin’s price movements.
The total notional value of these positions – the total value of the underlying assets represented by the options – is approximately $350 million. Lim pointed out 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 under $79,300. This means that for the traders to make a profit, the price of Bitcoin must exceed this level on the option expiration date. This price represents an increase of approximately 16% over the price of Bitcoin when these trades were executed.
“Very bullish positioning heading into the election, and great to see institutions increasing their size on CME in this way,” Lim said. He added: “Perhaps a good sign that there is and will be growing liquidity in the crypto derivatives markets as the asset class matures.”
The timing of these transactions is particularly noteworthy. With the US presidential election looming, market volatility is expected to increase, potentially impacting the entire Bitcoin and crypto market. Overall, the majority of experts believe that a Trump victory is bullish for the BTC price.
At the time of writing, BTC was trading at $72,382.
Featured image created with DALL.E, chart from TradingView.com