Bitcoin (BTC) may have recovered from $ 47,000 low on April 25, but the subsequent 15% recovery was not enough to instill optimism in the BTC options markets. Even at the current level of $ 54,000, the price is still 17% lower than the $ 64,900 ever reached on April 14.
The Crypto Fear & Greed Index reached a low of 12 months, indicating that investors are closer to “extreme fear”, ie a complete change in the level of “extreme greed” observed on 18 April. This index collects data on price volatility, volume changes, social media, bitcoin dominance and recent search trends.
When Bitcoin’s price fell and then recovered, the more experienced trading options for whales and arbitrage agencies were far from panicking, but their main indicator of risk recently reached a 12-month high. Despite these “deteriorating” conditions, these professional traders are neutral both in terms of deviations (option pricing) and buy-to-buy (risk exposure).
The relationship between adjusted call options and call options remains neutral.
Call options give the buyer the right to have BTC in the future at a fixed price, while the seller must respect this privilege. For this right, the buyer pays the other party an advance payment (premium). Call options are considered neutral or bullish because they give the buyer the potential for high impact with little initial investment.
On the other hand, put options provide the buyer with hedging or protection against negative price fluctuations. As a result, they are widely used in neutral and bearish strategies.
Open interest in Deribit BTC with expiration date. Source: Laevitas
As you can see from the chart above, the call and put options are in balance except for Friday’s expiration. While this may reflect optimism in the short term, a more subtle look shows that some very optimistic alternatives dominate the scene. So if you adjust it to a more realistic price range over the next four days, calls and sales are more balanced.
The door of interest for Deribit BTC opened on April 30. Source: Laevitas
Notice how $ 72,000 to $ 120,000 calls dominate on April 30th. So referring exclusively to $ 44,000 to $ 68,000, calls represent 48% of your outstanding open interest.
Indicator price risk indicator neutral
To understand how professional traders correctly balance the risk of unexpected market movements, 25% delta deviations provide reliable and immediate analysis of “fear and greed”.
This indicator compares similar buy (buy) and sell (sell) options side by side and becomes negative when the premium from a neutral to bearish put option is higher than for a similar risk call option. This situation is usually considered a “fear” scenario.
On the other hand, a negative divergence means higher costs to protect against growth, which is usually interpreted as a “greedy” measure.
Deribit BTC 90 day options with 25% delta deviation. Source: Laevitas
For the first time in 2021, the delta is normalizing by 25% after spending most of its time on the greedy side. A similar situation arose on March 25 after Bitcoin corrected 18% from the top of $ 61,800 $ 10 days earlier.
Overall, the options market indicators are neutral, indicating a lack of confidence in the recent $ 47,000 rebound. On the other hand, the same indicators can be interpreted as positive given that professional traders did not fall despite a decline of 28% in the last 11 days.