BTC volatility index on the Deribit exchange has reached its highest level since November 2022

A user of the platform sold $75 000 worth of bitcoin options and received $4,26 million

05.03.2024 - 10:05

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2 min

What’s new? The 30-day bitcoin volatility index on the Deribit (DVOL) crypto exchange rose from 41% to 76% in a month, reaching its highest since November 2022, according to data from the TradingView platform. On March 5, an unknown user sold 250 call option contracts worth $75 000 with an expiration date in December, Deribit’s Asia business development personnel Lin Chen told CoinDesk. The seller received a premium of $4,258 million. On Deribit, one option contract equals 1 BTC. “The seller probably has a large stock of BTC in hand and can directly lock in the profit from the selling price of $75 000,” Chen explained.

CoinDesk’s material

What else is known? The rise of DVOL positively affects the prices of options or derivative contracts that give the buyer the right to buy or sell the underlying asset at a later date. A call gives the right to buy and a put gives the right to sell. The higher the volatility, the higher the option premium.

Thus, DVOL often encourages investors to sell call options to generate additional income. This is one of the most popular strategies in the stock market. Call options are usually sold at prices that exceed the market rate of the underlying asset.

If the underlying asset’s price exceeds the strike price, the investor must sell the stock while keeping the premium received for selling the call.

Overall activity on Deribit, which accounts for 85% of the global crypto options market, increased. The combined notional open interest in the futures and options segments on cryptocurrencies reached a record high of $32 billion (data of the Laevitas platform). The options segment accounts for almost $30 billion.

According to Deribit Chief Commercial Officer Luuk Strijers, the excitement generated by spot exchange-traded bitcoin funds (ETFs) could lead to BTC breaking not only the $100 000 mark but also the $200 000 mark.

Earlier, weekly inflows into crypto derivatives totaled $1,84 billion, the second highest ever recorded. 94% came from bitcoin products.

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