Derivatives traders are positioning for a potential Bitcoin rally following the US presidential election on November 5, according to Deribit CEO Luuk Strijers.
Strijers noted in his statement that there was a significant increase in demand for Bitcoin call options ahead of the November 8 option expiration, the first option expiration after the election.
Data from Deribit shows that there are currently more than twice as many calls as puts for this expiration. “There is over $2 billion of Open Interest for the November 8 option expiration, with $70,000, $75,000 and $80,000 being the dominant points. The put-call ratio is 0.55, indicating more calls than puts,” Strijers said.
Strijers added that the forward implied volatility for the post-election period is at 72.29%, indicating a potential price swing of around 3.78% in the days following the election. Charts shared by Deribit show a noticeable increase in Forward Implied Volatility (Forward IV) compared to Mark IV, reflecting the expected increase in market volatility during the election week.
“There is a clear spike in Forward IV compared to Mark IV, which suggests that investors are expecting higher volatility, especially during election week,” Strijers said. However, he noted that this peak in implied volatility is temporary and suggests that the market is not pricing in long-term uncertainty. “The Delta Skew (sold-call) of 25 is generally negative, which suggests that the market is expecting larger upside moves, which is an indication of bullish sentiment,” he added.
Strijers’ words were echoed by Arbelos Markets CEO Joshua Lim, who observed a strong increase in demand for call options in the $70,000 to $80,000 strike price range for Bitcoin. Lim noted that many market participants adopted a strategy of selling pre-election options and buying post-election call options at cheaper prices.
Lim added that there has been a significant increase in the purchase of call options in the $70,000 to $80,000 range, while interest in higher strike prices such as $100,000 has decreased accordingly.
*This is not investment advice.