Bitcoin Options Are Not Limiting BTC Prices

Main Insights:

• The rise of covered calls gained popularity as cash-and-carry returns plummeted, yet evidence indicates they are not fundamentally depresssing Bitcoin’s price.

• Stable put-to-call ratios alongside increasing put demand imply that hedging and yield strategies are aligned with bullish sentiment.

As the Bitcoin (BTC) price began a downward trend in November, traders speculated on the reasons behind institutional inflows and corporate accumulation not being able to maintain valuations above $110,000.

A frequently mentioned rationale is the escalating interest in Bitcoin options, especially those associated with the BlackRock iShares spot Bitcoin (IBIT) exchange-traded fund.

In December 2025, total Bitcoin options open interest rose to $49 billion from $39 billion in December 2024, prompting closer examination of the covered call strategy.

Critics suggest that large investors, by effectively “renting out” their potential gains for compensation, have inadvertently set a ceiling that keeps Bitcoin from advancing into its next parabolic phase. Understanding this perspective requires viewing a covered call as a balance between potential price growth and reliable income.

In a covered call strategy, an investor who owns Bitcoin sells a call (buy) option to another party, granting the buyer the right to purchase that Bitcoin at a predetermined price, like $100,000, by a specific date. In exchange, the seller receives an upfront cash payment, akin to accruing interest on a bond.

This options approach differs from fixed income products since the seller maintains ownership of a volatile asset, even though their ultimate upside is restricted. If Bitcoin increases to $120,000, the seller must sell at $100,000, forgoing further profits.

Traders contend that this interaction suppresses price movement, as professional dealers acquiring these options frequently sell Bitcoin in the spot market to hedge their risk, resulting in a persistent “sell wall” near popular strike prices.

Transition to Options-Based Yield Following Cash and Carry Trade’s Decline

This pivot to options-based yield is a direct result of the decline of the cash and carry trade, which involves selling BTC futures while holding an equivalent position in the spot market.

Throughout late 2024, traders consistently reaped a premium of 10% to 15%. However, by February 2025, this premium had dipped below 10%, and by November, it found it challenging to stay above 5%.

In pursuit of better returns, funds shifted towards covered calls, which provided more attractive annualized yields ranging from 12% to 18%. This transition was reflected in IBIT options, where open interest surged from $12 billion to $40 billion in late 2024. Nevertheless, the put-to-call ratio remained stable below 60%.

If widespread “suppressive” call selling were indeed the prevailing trend, this ratio would have likely plummeted as the market became inundated with call sellers. Instead, the data suggests a balance, indicating that for every yield-oriented seller, there’s still a buyer aiming for a price breakout.

The put-to-call ratio implies that although some participants are offloading upside call options, a much larger contingent is acquiring put (sell) options as a safeguard against possible price declines.

This recent defensive posture is mirrored in the skew metric. While IBIT put options were trading at a 2% discount in late 2024, they are now at a 5% premium. Simultaneously, implied volatility, a gauge of expected market turbulence, fell to 45% or less from May onward, down from 57% in late 2024.

Reduced volatility lowers the premiums that sellers can earn, which means the impetus to engage in this so-called “suppressive” strategy has diminished, despite a rise in total open interest.

Claiming that covered calls are restraining prices lacks merit when the sellers of those call options stand to gain the most if prices ascend towards their target levels. Rather than serving as a restriction, the options market has evolved into the main arena where Bitcoin’s volatility is monetized for yield.

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