• This article explains the terms needed to understand options data, and how to interpret it with regards to recent price rallies in the crypto markets.
• It explains the two main types of options contracts: call and put. It also outlines the pull-call ratio (PCR), which is used to evaluate market sentiment.
• Options expire on a predetermined date, usually set on the third Friday of the expiration month, after which they can no longer be exercised.
What are Options?
Options refer to contracts that give market participants the right to buy or sell an asset at a predetermined price (the strike price) on or before a fixed date. There are two main types of options contracts: call options and put options. Call options refer to contracts that give the holder the right to buy an asset at the strike price, while put options allow market participants to sell an asset at the strike price. The premium is what a buyer pays for an option contract. Options have an expiration date predetermined when they are created, after which they can no longer be exercised.
Why Are They Used?
Options can be used for several purposes such as speculation and hedging against investment risks. Additionally, understanding the pull-call ratio (PCR) provides users with information about general market sentiment; if PCR is greater than 0.7 it suggests bearish sentiment, whereas if it’s less than 0.7 it suggests bullish sentiment.
Recent Price Rally Threatened by Upcoming Bitcoin & Ethereum Options Expiry
Crypto markets have enjoyed significant price rallies over the past week since BlackRock filed for a spot Bitcoin exchange-traded fund product (ETF). However, with $1.27 billion in Bitcoin and Ethereum options set to expire soon this rally may soon be threatened as investors may decide not to exercise their rights due to expiry dates being reached without prices reaching expected levels according to initial predictions when entering into these trades .
What Does this Mean?
This means that those who purchased put or call option contracts could potentially face losses if prices do not reach expected levels by expiry dates due to lack of liquidity for exercising these rights leading investors not wanting to exercise their rights dueto fear of further losses from potential slippage in prices . Furthermore , this could lead other investors feeling uncertain about entering into any new trades until prices settle down which in turn will affect overall market sentiments negatively leading possible corrections in prices .
In conclusion , upcoming expiry dates for Bitcoin & Ethereum option contracts could have significant impacts on current prive rallies depending on how many investors opt out of exercising their contractual rights due fears of further losses resulting from price slippages . Therefore , understanding how these option contracts work along with closely monitoring PCR ratios gives users valuable insights into overall market sentiments which could help better inform investment decisions .