This month’s Ethereum options expiration suggests ETH’s upside is limited


To date, the price of Ether (ETH) has gained 85% so far in 2021, and options traders remain very optimistic about the short-term performance of the altcoin.

The next due date of March 26 has more than 96,000 (USD 172 million) call option contracts with a strike price between USD 2,240 and USD3,520. Does a profit of 25% or more correctly reflect current market sentiment, or are these traders just too optimistic about the odds of Ether?

Ether price in US dollars. Source: TradingView

Although the effective price for the right to acquire Ether at a fixed price on March 26 is much lower, These options cost buyers at least $ 2 million. If Ether does not rise by 25% from the current price of $ 1,808 in two weeks, these call options of $ 2,240 will be worthless.

Added open interest in Ether options for March 26. Source: Bybt

As we can see in the previous graph, the buy / sell ratio is relatively balanced at 1.07, and the most bearish put options above the $ 1,800 price are non-existent. Meanwhile, more bullish traders have packed the territory above $ 2,240, in part due to its low price. The cost per option contract for the last two weeks ranged from $ 6 to $ 40.

Even if these call option holders previously bought while Ether was trading below $ 1,400, it would make sense to close the position and take profit. These options will lose value over time as the March 26 deadline hits, unless the price rises above their respective strike price.

So these traders are either expecting Ether to break above $ 2,240 within two weeks, or options are being used in more complex strategies. Cointelegraph previously explained how Ether call options of $ 10,000 are often used in calendar spreads.

The main risk indicator of the options reflects a neutral value

To assess the bullish level of traders after Ether hit a local high of $ 1,880 on March 9, Let’s analyze the 25% slope of the delta of the options.

As long as the options market is unwilling to take downside risks, the indicator turns to the negative side. On the other hand, a positive 25% slope indicates that traders are demanding less premium (risk) for upside protection.

3-day chart of the 25% slope of the options delta. Source: laevitas.ch

The chart above shows us that the indicator ranges from 5 to -10, which is considered a neutral zone.

Had the options traders been effectively bullish, the upside protection call options would have traded at a premium.

There is a possibility, as noted above, that investors are using a more complex strategy involving different expiration dates or strike prices. Still, if these options have been bought exclusively for upside leverage, it certainly does not reflect the general sentiment as measured by the delta tilt indicator.

The views and opinions expressed here are solely those of the carr and do not necessarily reflect the views of Cointelegraph. Each investment and commercial movement involves risks, you must do your own research when making a decision.

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