The Bitcoin derivatives market is signaling stability across a wide range, rather than experiencing a drastic climb or sudden crash.
Activity in the options listed on Deribit indicates robust support around the $85,000 mark, driven by significant put selling (writing) as traders provide insurance against declines below that threshold.
Concurrently, some traders are hedging against potential bullish movements past the $95,000-$100,000 range by writing call options at these levels, thereby establishing resistance, as reported by market maker Wintermute.
This suggests that volatility may remain confined within this spectrum as both put and call sellers reap premiums from their options trades.
“There’s strong put-selling support at 85k (followed by 80k/75k as secondary defenses), while call overwrites limit upside around 95k–100k. Vol is being harvested within this range,” Wintermute’s Desk Strategist Jasper De Maere mentioned in a recent email.
Building a Support Floor with Put Selling
Put options are agreements that provide payouts if the underlying asset dips below a predetermined price on or before a specific date. Therefore, traders selling the $85,000 strike put display confidence that BTC won’t drop below that level, at least in the near future.
When many traders sell puts together at a certain price, it often establishes a self-reinforcing support level.
In the case of BTC, the $85,000 put is currently the second most favored option across all expirations, with a notional open interest exceeding $2 billion at the time of writing. Notional open interest refers to the dollar value concerning the number of active contracts at a given moment. On Deribit, one options contract corresponds to one BTC.
If prices approach that level, put sellers may buy BTC in the spot or futures market, reinforcing support.
Resistance Through Call Overwriting
On the upper end, bitcoin holders are opting to sell call options against their long spot positions in the range of $95,000 to $100,000. These “overwrites” provide income from the premiums received for insuring against price surges but require call sellers to deliver bitcoin if prices exceed those levels.
The consequence: These call sellers could exert additional selling pressure on the spot market if prices approach $100,000, complicating any potential breakout.
The heightened interest in selling the $100,000 strike call indicates a cautious sentiment regarding a swift ascent into the six-figure territory. As of now, the $100,000 call stands as the most popular choice with a notional open interest of $2.37 billion.
Engaging in Volatility Harvesting
“Vol is being harvested,” De Maere noted, referring to traders who sell both puts and calls to collect premiums. This strategy effectively generates yield by betting on decreasing volatility – hence the term “volatility harvesting.”
These options gradually diminish in value and become worthless if bitcoin continues to trade sideways, allowing sellers to retain the full premiums received.
As of the latest update, BTC was trading at $87,400, according to CoinDesk data.
