Ether (ETH) price rose 50% at the top of the London hard fork as many investors expect the upgrade to solve the problem of high transaction fees and turn the altcoin into a deflationary asset.
Dan Morehead, CEO of Pantera Capital, has predicted that the upcoming upgrade would likely result in Ether “flipping” Bitcoin (BTC) as the leading cryptocurrency, but this is an issue that is highly controversial.
To understand the impact of recent price movement, traders should analyze the weekly flow of options. Deribit derivatives currently hold an 86% market share in this segment and the total open interest for August 6 is currently $ 357 million.
The neutral to bullish call option (buy) offers buyers upside protection and the holders of the put option (sell) are protected against downward price movements. By measuring the price risk of each option, traders can better understand how bullish or bearish traders are positioned.
Option data shows that bears have been taken by surprise
The initial view shows a reasonably balanced situation as the call-to-put ratio is 1.15, which slightly favors the neutral to bullish call option by 15%. This indicator reflects the 70,956 call options that represent an open interest of $ 191 million, stacked with 61,632 put options that represent an open interest of $ 166 million.
As the graph shows, the bears did not expect ether to hit $ 2,700 and this can be seen where there are no protective put options (pink area) above this strike price.
If ether stays above this level by August 6, all of those 61,653 contracts will become worthless. This is extremely unusual and reflects how unexpected the strong uptrend was.
The bulls’ advantage largely depends on Ether at $ 2,600
While any protective put option above USD 2,700 becomes worthless, some of the neutral to bullish call options have been placed at USD 2,800 and USD 3,000. This means that even if Ether stays at $ 2,700, 39% of the $ 191 million outstanding interest on the call options will be worthless.
At $ 2,700, the neutral to bullish call options have a $ 116 million advantage. However, if Ether trades below $ 2,600 on Aug 6, that number will drop to $ 75 million.
Either way, these weekly options largely favor bulls and add to their reserves for additional bets for the upcoming August expires. Bears should prepare to lick their wounds and wait for a local high before trying new bearish option trades.
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