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Ethereum at $3,000 Possible According to Options Open Interest

Fri, 10/28/2022 - 10:40
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Arman Shirinyan
Options on Ethereum show unclear but interesting picture
Ethereum at $3,000 Possible According to Options Open Interest
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The Ethereum derivatives market can sometimes give us useful insights into the future movements of assets like Ethereum. In today's case, we might see the interesting movement of funds on the options market as investors are making a bold $3,000 prediction for Ethereum.

After Ethereum's most recent explosive growth on the market, investors started to rapidly open call contracts at $3,000. While the expiration date on most open contracts remains the same as during the November-December period, the desire to bet on such a high target shows a shift in the sentiment of investors. 

Source: Deribit

However, it is too early to celebrate the fact that traders and investors are betting on such a high price. The fact that someone is opening a large volume of contracts at the aforementioned level may be a part of hedging an extremely large spot market position.

While some speculative traders think it is a good idea to use options for regular trading, funds managers and institutional investors tend to use them as a hedging tool. Traders who use options as their main trading instrument usually make their profits off of the contract's price.

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Even if Ethereum does not reach $3,000, a significant price spike would put the majority of $3,000 call contract holders, who opened it right now, in serious profit. Technically, owning an option contract can be considered as exposure to an underlying asset.

Such a strong spike in volume could be part of a large hedging strategy, as we have already mentioned, since short volume on Ethereum derivatives markets remains high, hedging those positions with options would make sense for an investor in a high position who would like to negate losses in case of upward volatility.

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About the author

Arman Shirinyan is a trader, crypto enthusiast and SMM expert with more than four years of experience.

Arman strongly believes that cryptocurrencies and the blockchain will be of constant use in the future. Currently, he focuses on news, articles with deep analysis of crypto projects and technical analysis of cryptocurrency trading pairs.