After marking a new $ 1,477 high on January 24, Ether’s (ETH), the price was reduced to $ 1,206 on January 27. But according to derivatives markets, the bulls remain confident that USD 2,000 is still within reach.
The neutral to bearish open rate of put options above $ 1,360 is irrelevant, and only 2,540 ETH options, equivalent to $ 3.4 million in outstanding interest, are above that price level. That said, more than 99.5% of open interest on put options will become worthless if ETH trades at $ 1,360 or higher.
As shown above, data from both call and put options appears to be balanced as the open yield indicator favors bulls at only 34%. The data also shows that Ether’s 79% year-to-date rally has really taken its toll on bears.
Currently the neutral to bullish call options, ranging from $ 1,000 to $ 1,340, are 59,730 ETH. That works out to $ 79.6 million in outstanding interest, not counting the strikes under that range. Therefore, aside from dominating on a 23-to-1 ratio, the bulls have all the incentive to keep pushing the price up.
For example, if ETH goes above $ 1,440, another 56,000 call options come into play, compared to just 7,600 put options. This equates to an additional $ 70 million in outstanding interest, favoring the neutral-to-bullish call option. The imbalance would then be $ 152 million, extinguishing the bears’ hopes completely.
Not every outstanding interest will expire in the coming months.
The 2021 maturity calendar includes 50% of interest outstanding on February 26 and March 26, although longer-term options are becoming increasingly relevant throughout the year.
Premium futures traders are bullish
The futures premium measures how expensive longer-term futures contracts are compared to their current position in traditional markets. It can be seen as a relative reflection of investor optimism, and fixed calendar futures usually trade at a small premium over regular spot exchanges.
These fixed month futures contracts should trade in healthy markets at a premium of 10% to 20% on an annual basis (basis), and any number above this range indicates extreme optimism. Meanwhile, the lack of a premium is a sign that traders could be bearish.
The chart above shows that the premium was slashed drastically on January 21 as Ether plunged more than 20% to test levels below USD 1,100. More recently, on Jan. 27, the premium hit an annualized interest rate of 8.7%, almost neutral to bearish.
This data is more than enough evidence to support the claim that the options market is bullish. Even during the worst sell-off in recent months, the derivatives markets have taken a positive stance.
The current rate of 2.9% equates to a healthy premium of 20% on an annual basis, indicating that bulls do not expect any problems.
Top traders have the space to add long positions
Data provided by the exchange highlights the net long-to-short positioning of traders. By analyzing each client’s position on the spot, perpetual contracts and futures contracts, one can get a clearer picture of whether professional traders are leaning bullish or bearish.
With this said, there are occasional discrepancies in the methodologies between different exchanges, so viewers should track changes rather than absolute numbers.
The top traders indices at Binance and Huobi were in net short ETH positions for the past week. OKEx stands out as its top traders have been up long-to-short over the past five days and it currently prefers long-to-short at 56%.
This shows that there is little evidence of excessive optimism by top traders, while there is room for leverage in the event of an impending bull run.
In summary, both ETH options and futures markets are showing clear signs that traders are incredibly optimistic about Ether in the coming months.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the view of Cointelegraph. Every investment and trade move carries risks. You should do your own research when making a decision.