Bitcoin price, USD. Source: TradingView
At that time, at 26. In January, they asked for a 150% increase in the $32,000 price, which seemed rather far-fetched. As a result, June BTC call (buy) options for $80,000 were trading on Deribit for $2,240 or 0.07 BTC.
Option to buyBTC June for $80,000 in BTC. Source: Deribit
Less than two months later, when BTC was announced at 13… March reached $61,700, the same call option peaked at 0.15 BTC, or $9,255. That’s a tripling in less than seven weeks. Remember, despite a 93% increase to $61,700, it took another 30% increase to reach the $80,000 mark.
BTC June Call Market. Source: Deribit
Despite the recent increase in the BTC price, the implied probability of the option (delta) is currently 39%. The price of this call option has also increased due to changes in BTC volatility, as sellers demand a higher risk premium when markets are uncertain.
Intense price fluctuations in any direction increases volatility, and unexpected news from the mainstream media usually pushes the indicator higher.
Historical volatility of bitcoin options at 60 days. Source: Buybitcoinworldwide.com
Notice how the volatility of BTC has increased from 4% in January to 5% now. This event is particularly beneficial for call buyers. Even if the BTC had stayed the same, the option price would have risen accordingly.
The likelihood of an option should not be assumed automatically
The price of options also largely depends on the distance to expiry. The same $80,000 appeal can be cancelled two days before the deadline. Therefore, traders should not place too much value on the perceived probability of options (delta).
Right now, the $80,000 June call option seems far-fetched due to its delta of 39% and the fact that BTC has risen 43% in the past 100 days.
Still, traders often consider buying impossible calls with a longer expiration date, as those who were brave enough to bet on BTC’s 150% price rise to $32,000 in January are likely very happy with the result.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Cointelegraph. Every investment and every stage of trading involves risk. You should do your own research before making a decision.
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