Whale Alert: $1M BTC Trade Bets on Volatility Expansion Outside $53K-$87K Range

In simple terms, an organization shelled out more than a million dollars as a premium to acquire 100 contracts each for the call and put options with a strike price of $66,000. These options are set to expire on November 29th, as confirmed by Lin Chen, who is the head of business development Asia at Deribit.

As a crypto investor, I prefer to employ a long straddle strategy when I anticipate significant price movements in either direction, as it allows me to capitalize on volatility. The call option serves as my safeguard against bullish market trends, increasing its worth as the value of the underlying cryptocurrency climbs. Conversely, a put option offers protection during bearish markets, gaining value as the crypto’s price decreases. In essence, I’m betting on both sides of the market, hoping for a substantial price swing that will offset the premium I initially paid.

When it comes to talking about strangles, straddles, and ratioed straddle strategies, it’s crucial to grasp the concept of buying and selling ‘option premium’. Sellers of this premium hope the market remains unchanged, while those who buy these options (straddle/strangle buyers) are hoping for market movement.

To ensure that the strategy becomes profitable and recoups the cost, the price of Bitcoin should rise to more than $87,000 or drop below $53,000 before the end of November, as Chen explained to CoinDesk.

Essentially, I’m positioning myself for a situation where Bitcoin’s volatility surpasses the current range of $53,000 to $87,000. If the price stays within this range until November’s end, this trade will incur losses, potentially amounting to the initial premium of $1 million I’ve invested.

Chen mentioned that there’s increased activity in November expiration options, possibly because traders are expecting market volatility following the U.S. presidential election on November 5th, with results expected on the 8th. Some traders have recently placed trades anticipating continued price swings leading up to the elections.

According to Chen, we currently have over $1.4 billion in outstanding Bitcoin contracts expiring at the end of November, and the ratio of put options (bearish bets) to call options (bullish bets) is unusually high at 0.66. In contrast, this ratio for December is 0.39. This suggests that there’s a significant increase in hedging activities related to the upcoming U.S. election.