According to Bitfinex Head of Derivatives Jag Kooner, the cryptocurrency derivatives market is buoyed by the expectation that a spot Ethereum (ETH) ETF will be approved by the end of May.
Traders are adjusting their ETH options contracts with an eye on the May 23 deadline, which is the final approval decision date for spot Ethereum ETF applications filed with the U.S. Securities and Exchange Commission by asset managers VanEck and Ark/21Shares.
Kooner emphasized that there was a noticeable increase in the buy side open positions of long-term options for March, April and May. “This increase occurred mainly in the last week and currently the put-call ratio is heavily tilted towards the long side at 0.31,” Kooner added.
A put-call option ratio below one indicates that the call volume exceeds the put volume and indicates an upward trend in the market.
However, Kooner also noted that other sources suggest traders are taking a more cautious approach at the moment, estimating that spot Ethereum ETF approval may not occur until 2025 or 2026. “Whether ETH is categorized as a security or commodity is an important factor influencing these predictions and the reaction of the derivatives market,” he added.
Kooner cited derivatives data showing that the maximum loss price for ETH for February week-end and month-end expiration dates was around $2,300, while the highest open position relative to the strike price was around $2,400 – $2,450. “For end-April and longer expiration dates, the maximum loss price is higher around $2,400 and there is a heavy buy-side bias there as well, with the highest open interest relative to the strike price being around $2,900,” Kooner added.
However, there is an anomaly in ETH options open interest in March. Kooner explained the situation as follows:
“There is a maximum loss price of around $2,000 in March, and open positions are fairly dispersed between $2,000 and $3,000. This means traders are speculating on short- and long-term growth but taking a more cautious approach in the near term. “This situation may have been greatly influenced by the FED's recent statements that it is not considering the possibility of a rate cut before May 2024.”
*This is not investment advice.