Ether put-call options ratio is a bullish indicator for the market in 2024, says analyst

There has been an increasing number of outstanding calls compared to puts in ether options open interest ahead of the end of January expiry date, according to data from the Deribit derivatives exchange. That indicates many investors anticipate the digital asset’s price will appreciate in early 2024, an analyst said.

“If you look at the year end ether expiry, the put-call ratio is 0.44, which means a ratio of 4.4 puts versus 10 calls. In January 2024, this ratio is however 0.19 implying rounded 2 puts for every 10 calls, a much more bullish split,” Deribit Chief Commercial Officer Luuk Strijer told The Block.

A put-call options ratio below one indicates that the call volume exceeds the put volume, signifying bullish sentiment in the market. It is assumed that a trader who buys call options is implicitly bullish on the market, while a put buyer is bearish. According to The Block’s Data Dashboard, today’s ether put-call ratio on Deribit is 0.35.

Deribit data also shows there are over twice as many calls outstanding compared to puts ahead of the Dec. 29 expiry. Of the around 974,000 call options outstanding for the end of month expiry, the largest group are calls at the strike price of $2,500. This suggests that many derivatives traders are betting on the price of ETH +0.97% to rise above this level by the end of December.

Ether has risen by over 1% in the past 24 hours and was trading at $2,348 at 12:15 p.m. ET.

Increase in ether options open interest

There has been a significant increase in ether options open interest leading up to the upcoming end-of-month, quarter, and year expiry date on Dec. 29. “The December expiry is the largest expiry Deribit currently has,” Strijers said.

“There are now $3.3 billion out of a total of $7 billion in ether options notional open interest that will expire on Dec. 29, almost 50%,” Strijers added.

An increase in open interest suggests that new money is entering the market, indicating growing participation and potential liquidity. It also signals an influx of sophisticated traders into the cryptocurrency market and the promise of better price discovery.

Options are derivative contracts that give a trader the right but not the obligation to buy or sell the underlying asset at a predetermined price on or before a specific date. A call option gives the right to buy, and a put offers the right to sell.