The open interest of Ether options (ETH) grew by 230% to reach USD 393 million in the last three months. While this is an impressive figure, it does not fully reflect how the derivatives are being used.
Prices look up
The first thing to consider is the most used price levels (strikes). Again, this information does not provide a clear picture of whether these options are used primarily for bullish or bearish strategies.
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In general, an overcrowded chart with prices below the current market level indicates that traders were either taken by surprise due to a recent upswing or that there are few investors currently having bullish sentiment.
According to the above data, there are currently 535 thousand Ether options that have open interest with prices of USD 380 or less. On the other hand, there are only 243 thousand Ether options with prices of USD 425 or more.
This could be explained in part by the 68% upward run to the $400 level that occurred in late July, although this is not necessarily a positive indicator.
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Unlike futures contracts, options are divided into two segments. Call options allow the buyer to purchase Ether at a fixed price on the expiration date. On the other hand, the seller of the instrument will be obliged to sell the Ether.
By measuring whether there is more activity through call or put options, it is possible to know the general feeling of the market.
There is currently 21% less open interest in put options than in call options. This is the lowest level recorded in 3 months and indicates a general upward sentiment among option traders.
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Although it is a good indicator, the buy/sell ratio reflects transactions that could have occurred more than a month ago. Therefore, to better measure current market sentiment, you should focus your attention on the 25% delta slope indicator.
The tilt indicator confirms the bullish sentiment
The 25% delta slope compares equivalent call and put options side by side. If protection from price increases through call options is more expensive, the slope indicator moves into the negative range. The opposite occurs when investors are bearish, causing put options to trade at a premium, causing the tilt indicator to change positively.
The upper graph shows the change to a bullish posture since the end of May, reaching an almost extreme level of 20% optimism at the end of July. Currently, the -12% slope is in a bullish territory, which confirms what the buy/sell ratio indicator shows.
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In general, Ether’s options appear to be bullish despite the concentration of prices below the $400 level.