Open interest rates on Ether (ETH) futures grew by 250% over the last three months to reach $ 1.7 billion. This incredible buildup happened when the cryptocurrency broke the $ 400 resistance to reach its highest levels in two years.
ETH futures open interest in USD terms. Source: Skew
Unfortunately, there is no way to determine whether futures contracts are mostly used for protection or are the result of increasing leverage laws at Ether price reaching $ 500.
The only reliable information of such a market is the basis, which is the comparison of a contract price of a futures versus the spot price of the assets on the open market.
A positive basis, also called the ‘premium’, indicates a cash situation, which is expected during healthy markets. This simply shows that sellers are asking for more money to postpone trading arrangements.
ETH 1-month futures annual basis. Source: Skew
Currently, the 1-month futures contracts are trading at an annual premium of 20%, indicating that buyers are betting that Ether’s spot price will rise.
The relationship ban is run neutrally
To determine exactly how bullish professional traders are, one needs to focus on options markets. The two most commonly used indicators for evaluating bull and bear sentiment are the put / call ratio and skew.
The put / call ratio consists of comparing put options open interest versus call options. Calls are mostly used by neutral to bullish strategies and the opposite is true for put options.
ETH options open interest put / call ratio. Source: Skew
Despite signs of strong bullish sentiment in futures markets, the put / call ratio is in a neutral position, with calls and set options open interest balanced balanced.
This is a striking contrast to the 0.8 level of three months ago, indicating that pits were 20% smaller than neutral and Bullish call options.
Skew is also less Bullish
To better interpret when the previous market sentiment pollutes the put / call ratio, the current skew level provides a real-time anxiety and greed indicator based on option prices.
Skew indicators will shift to negative if call (neutral / bullish) options are more expensive than equivalent putts. The indicator usually oscillates between -20% to + 20%, and it reflects the current market, regardless of the previous days or weeks of activity.
ETH 3-month options 25% delta skew. Source: Skew
The chart above reflects how professional traders became less Bullish after Ether finally broke the $ 400 resistance on August 13th.
Even though the Skew remains on Bullish territory, it is now back to the same level of the previous month when Ether traded sideways near $ 240.
September options appear Bullish
With less than forty days before the September 25 expiration date, markets need to paint a clearer picture of how much is currently in call and put options.
September 25 call options pricing. Source: Deribit
By multiplying open interest by each strike with the marked (fair) price, one can conclude what such a position would make at the present moment.
There are currently 93.3K call options from $ 340 to $ 880 before the September expiration. Options with higher stakes have lower market prices because their chances are smaller.
These options are currently valued at $ 4.4 million, although the open interest rate added up to $ 40.1 million.
Open interest gives the same weight for each strike, regardless of market value, so using marked (fair) prices provides better data.
September 25 put options prices. Source: Deribit
The 28.8K put options in the same range are currently valued at $ 940K, significantly less than their own calls.
This indicates that the sentiment of professional traders is less Bullish as shown in the prices, but much less money is spent on put options than call options.
$ 500 seems to be possible according to option contracts
An interesting prospect of these $ 480 and higher strikes for September 25 is the sheer amount of 53.7K call options. At current market prices, those are worth $ 1.0 million, and 25% of the value of the $ 340 and higher call options compiled.
From a derivatives trading perspective, not only does the $ 500 level seem to be possible within 40 days, but there is currently a hefty sum.
Futures contract premiums support such indicators, as professional traders appear to be Bullish, despite recent $ 440 top.
Ether seems to be enjoying the positive momentum created by decentralized finance, oracles, and decentralized rapid expansion use.
What the derivatives indicators can tell you are dips for sale.
The views expressed here and there are only those of the author and do not necessarily reflect the views of Cointelegraph. Every move of investing and trading involves risk. You have to do your own research when making a decision.
