Over the past three months, open interest in Ether (ETH) options has increased by 230% to a total value of $393 million. However impressive, the figure itself does not explain how traders are using derivatives.
Strike levels seem bullish
The first element to observe are the most used price levels (strike). Not even this information offers a clear view of the options, as they can still be used for bullish or bearish strategies.
In general, a chart with strikes below the current market level indicates that traders have been caught off guard by a recent increase, or that investors currently bullish are outnumbered.
According to the data shown above, currently the open interest of options on Ether with a strike of $380 or less is $535,000, while that of options with a strike of $425,000 or more is $243,000.
This disparity could be partially explained by the bull run that at the end of July brought the asset to the $400 level, marking a growth of 68%, although this is not necessarily a positive indicator.
Unlike futures contracts, options are divided into two segments. Call options allow the buyer to buy Ether at a fixed strike price by an expiration date. Conversely, sellers of the instrument will be required to sell Ether.
By measuring the differences between assets in call options and put options, we can estimate an overall market sentiment.
At the moment, the open interest of put options is 21% lower than that of call options. This is the lowest level in the last 3 months and indicates a general optimism on the part of option traders.
Although it is an effective indicator, the put/call ratio reflects trades that may have taken place more than a month ago. Therefore, in order to get a more accurate assessment of current market sentiment it is necessary to focus on the 25% delta skew indicator.