Traders are celebrating Bitcoin’s upcoming ETF, but options markets are less secure
The US Securities and Exchange Commission is expected to decide on October 18 whether or not an application by asset manager ProShare Capital Management for an exchange-traded fund Bitcoin (ETF) will be granted.
As previously reported by Cointelegraph, SEC chairman Gary Gensler recently suggested that the regulator would be inclined to approve indirectly exposed Bitcoin futures ETFs under the Investment Companies Act of 1940.
On October 15, the Nasdaq Stock Market certified the listing of Valkyrie Bitcoin Strategy ETF stocks. The deadline for the SEC to officially approve Valkyrie’s ETF filing ends October 25, but could be extended to December 8.
$ 70,000 call options show their implied probability reaches 25%
Two weeks ago it would have been a daunting task to find an investor willing to bet on the Bitcoin (BTC) price of $ 70,000 for October 29th from -picked at the time. On September 30th, a BTC call (buy) option of USD 70,000 was traded at Deribit for USD 194 or 0.0045 BTC.
As shown above, the same option is currently trading at $ 1,570, or 0.0262 BTC, as Bitcoin has risen 39% to $ 60,000 since the start of the month. While that’s still a long way to go for a $ 70,000 call, the odds have increased significantly.
Even if the price of BTC increases, the implied option probability (delta) is currently 25%, which at first glance could decrease.
Traders shouldn’t take option probabilities literally
The option price depends heavily on the expiry time. Given Bitcoin’s 4% daily volatility, anything can happen before the option expires on October 29th. Therefore, traders shouldn’t get too fixated on options. Implies probability (delta).
In order to better estimate the ETF approval rate of Bitcoin at the end of the month, one should use the delta of 50,000 USD as the “base” scenario. Traders should assume that a 17% drop in price would definitely signal that the US SEC’s decision has been delayed or rejected.
Given that the USD 50,000 call is trading with a delta of 84%, or an implied probability, investors are pricing in 16% odds for the doomsday scenario.
A call option of $ 70,000 on October 29th at 8 a.m. UTC, indicating that the ETF has been approved, gives an implied probability of 25%. The options markets certainly show higher chances of positive movement but are unlikely.
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