Bitcoin has retreated over 25% from its recent highs in early May, and the implied volatility of options on Deribit’s bitcoin options exchange has also decreased significantly over the same period.
With the consolidation of price in the low- to mid-$7000s, the prices of bitcoin options have fallen dramatically, giving buyers more favorable entry points. After trading close to 100% implied volatility in early May, the at-the-money options are currently trading 70%, which is close to the lowest level of the last several months.
The largest increases in open interest have been in the June 29 (29-06-18) 9000 calls and 8000 puts.
With implied volatility at the lower end of the historical range, buying options can be an extremely valuable tool to either take long or short directional positions or to hedge directional risk in already established cash/futures positions.
Take a look at the bitcoin put options on Deribit as a useful tool to protect long positions, or to profit when the price of bitcoin goes lower. Put options give the buyer a defined level of risk – the loss is limited to the amount paid for the put. For many investors, this can be a better mechanism to take advantage of prices moving lower than taking outright short positions in bitcoin futures, with unlimited risk.
With Deribit’s BTC Index trading $7250, the market on the September 28 (28-09-18) $7000 call is $1350-1385 and the market on the September 28 (28-09-18) put is $1035-1055.
The width of the bid-ask spreads on Deribit continues to tighten, allowing buyers and sellers less slippage when entering a position. If you haven’t visited Deribit’s one-of-a-kind bitcoin options marketplace, now is the time.