Buy rumors, sell facts? $ 10k ether options are down 88% from the high

$ 10,000 Ethereum options for December 2021 will cost buyers $ 734 per option, but they’re only worth $ 85 right now and the ETH price is 47 percent away from all-time highs.

This year’s 500% cumulative spike sent Ether price to an all-time high of $ 4,380 on May 12, a rally even stronger than the move from late 2017. Bullish or bubble, depending on how you look at it. drove the price of ether around 390. from $ 290 in November 2017 to $ 1,420 in mid-January 2018.

Perhaps this year’s big rally is a DeFi and NFT bubble, it will take them two years to get back to the top, but it seems too early to predict now. However, some analysts, including C Network CEO Alex Mashinsky, believe Ether is about to “overturn” Bitcoin.

According to Mashinsky, the primary use case of Ether is profit farming, staking, or locking cryptocurrencies in exchange for rewards, while Bitcoin is mainly used as a store of value.

The rising expectations are another reason Ether investors remain bullish even though the current price is 47% below its all-time highs. Additionally, on July 1, global auditing giant Ernst & Young released the third version of Ethereum’s zero-knowledge scaling solution called Nightfall 3.

Nightfall 3 uses zk rollups, a Layer 2 scalability that includes batch transfers that are “rolled” into a transaction to improve transaction efficiency and privacy on the Ethereum network. Research suggests that this is likely to result in a 90% reduction in gas charges.

Option premium can be reduced daily

Regardless of how optimistic Ether investors are, the closer an options contract is to the expiration date, the lower the premium. This effect means that the odds decrease the closer the price target date is.

Ether call options at $ 10,000 for December 31 at ETH | Source: Deribit

The graph above shows a year-end call option of $ 10,000 on Ether, which peaked on May 14 at 0.177 Ether. At the time, Ether was trading at $ 4,150, so each option costs $ 734.

Remember, this option is worthless if Ether is at 3:00 p.m. on December 31st. is traded for less than USD 10,000 in Synthetic Team. Even if the price climbs to $ 9,950, the option buyer will still lose their upfront payment of $ 734. Hence, a 160% profit is required for these call owners to be profitable.

Not every $ 10,000 options trader is ruthless

Bitcoin magazine previously explained how professional traders use calls in strategies with multiple expiration dates, so trading Ether Options worth $ 10,000 should not be construed as just a bet.

For traders looking to take advantage of market distortions, selling $ 10,000 worth of call options is a great way for holders to make some profit, plus an initial margin requirement of around 10% which allows for some leverage .

For example, if a person buys $ 6,000 worth of ether call options on December 31, they can deposit 0.20 ether and sell 1 contract for a potential premium of 0.073 ETH.

This produces a return of 36.5% in 6 months, which equates to 86% APY. Unless a significant amount of margin is deposited, however, the seller of the call option risks being liquidated if the price of Ether goes up.

The same exact trade will produce much higher returns in bull markets as the call premiums tend to increase.

Teacher

According to Cointelegraph

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