Bitcoins the derivatives market is flashing signals of stability in a broad range rather than a massive moonshot or violent crash.
Activity in Deribit-listed options shows strong support around $85,000 from heavy put selling (writing) or traders offering insurance against price falling below this level.
At the same time, some traders are offering protection against bullish price moves beyond $95,000-$100,000 levels by writing call options at those levels, creating resistance, according to data tracked by market maker Wintermute.
Therefore, volatility can remain contained within this range as both put and call sellers collect premiums from option sales.
“Strong sell support around 85,000 (then 80,000/75,000 as secondary buffers) while calls overwrite cap upwards around 95,000-100,000. Vol is being harvested inside this band,” Wintermute’s desk strategist Jasper De Maere said in an email.
Put sell build a floor
Put options are contracts that pay out if the underlying asset falls below a set price on or before a specific date. So traders selling the $85,000 strike reflect confidence that BTC will not dip below that level, at least in the short term.
When a large number of traders sell puts en masse at a certain level, it often creates a self-fulfilling support.
In BTC’s case, the $85,000 put is the second most popular option across all expirations, with a theoretical open interest of over $2 billion at press time. Nominal open interest refers to the dollar value of the number of active contracts at a given time. On Deribit, one option contract represents one BTC.
If prices approach that level, put sellers are likely to buy BTC on the spot or futures market, creating support.
Overwriting calls creates resistance
At the higher end, bitcoin holders are selling call options against their long spot positions around $95,000 to $100,000. These “overwrites” generate income in the form of premium received for offering insurance against bullish price movements, but obligate call sellers to deliver bitcoin if prices rise past these levels.
The result: these call sellers can add selling pressure to the spot market if prices approach $100,000, making the breakout more difficult.
So increased interest in selling the $100,000 strike call suggests limited enthusiasm for a quick six-figure rally. At the time of writing, the $100,000 call was the most popular play with a theoretical open interest of $2.37 billion.
Volatility harvest in play
“Vol is being harvested,” De Maere noted, referring to traders selling both puts and calls for pocket premiums. The strategy essentially generates profits by betting on declining volatility – hence the name “volatility harvesting.”
These options steadily lose value and expire worthless if bitcoin continues to trade sideways, leaving the sellers to keep the full premiums received.
At press time, BTC changed hands at $87,400, according to CoinDesk data.
