Bull or Bust: Analyzing Ether’s Options Market Sentiment Ahead of March Expiry

Ether’s 2021 Surge: A Look at Optimism in the Options Market

In 2021, Ether (ETH) has wowed the financial world with an impressive 85% price surge. With traders riding the optimistic wave, the upcoming March 26 expiry sees over 96,000 call option contracts, valued at a hefty $172 million, poised between $2,240 and $3,520. Is the optimism warranted, or are traders just hoping for a moonshot?

The Price Puzzle: What Does It Cost to Play?

Despite ETH’s effective acquisition price being much lower, those call options come with a cost that might raise eyebrows. Buyers had to fork out at least $2 million upfront. If by the two-week mark Ether doesn’t escalate by 25% from its existing price of $1,808, those $2,240 call options could become about as valuable as a chocolate teapot—absolutely squat!

Call-Put Ratio: The Balancing Act

The call-put ratio is sitting at a relatively calm 1.07. However, bear in mind that there’s a glaring absence of bearish put options above the $1,800 strike price. This is a clear signal that bullish traders are monopolizing the upper deck. Their enthusiasm can be attributed to the low price of option contracts, which have varied from $6 to $40 recently.

When to Take Profits: The Decision Dilemma

Even if some traders jumped into the pool when Ether was below $1,400, one has to wonder if it would make sense to cash out now and stampede for the exit. With the March 26 deadline looming, these call options are likely to descend into worthless paper unless the market rises above their respective strike prices.

Delta Skew: A Key Indicator

Looking at trader optimism post-Ether’s recent peak at $1,880 on March 9 requires a glance at the 25% delta skew. If traders steer clear of downside risk, watch for a negative shift; conversely, a positive skew indicates the market is a little less skittish about upside potential. Currently, the skew has hovered in neutral territory ranging from 5 to negative 10, suggesting that traders might not be as bullish as they seem.

Conclusion: So, What Do We Make of It All?

While the call options suggest a desire for optimism, the skew shows that not all traders are sipping the bullish Kool-Aid. They might be using these options for intricate strategies instead of plain optimism. So whether we’re heading for a Bull Run or a bear cave remains anyone’s guess.