11 Apr 2022

Option traders are bearish, but the demand for options is still low

The high volatility skew suggests that option traders are long-term bearish, but the low implied volatility indicates they are hesitant to take directional bets.
Source: Skew
Options enable traders to bet on movements in price. Therefore, the more volatile an asset is, the more expensive are its options. Implied volatility (IV) is inferred from option prices and shows how volatile traders believe an asset to be in the future. The lower the IV - the lower the options prices.The volatility skew is the relative difference between prices of put and call options with otherwise similar characteristics. Historically for bitcoin, call options have been more expensive than put options, generally giving bitcoin a negative volatility skew.Bitcoin's volatility skew is now higher than it has been most of the time historically, indicating that the demand for puts is higher than for calls. Bitcoin options traders are bearish.Although the market sentiment is bearish among bitcoin’s option traders, they seem hesitant on taking directional bets, showcased by the IV being at its lowest since May 2021.The low IV shows that options are cheaper than in a long time, while the positive skew indicates that call options are relatively cheaper than put options right now. This might be an opportunity to buy some cheap calls, but puts are also relatively cheap.
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