Record CME BTC Open Interest Shows Institutions Bullish on Bitcoin Price
Best places to sell bitcoin 2020 options volume at CME rose 1000% this month as institutional investors built short-term bullish positions, but will BTC’s spot price rise?
Open interest is a more relevant metric
In simple terms, open interest is the total number of contracts held by market participants. Imagine a scenario where $70 million worth of call options are traded one week and reverted on the following one. Both the buyer and seller would be closing out their positions and risk. Despite $140 million being traded, market exposure (open interest) for such a scenario would be zero.
Keep in mind CME displays open interest in the number of contracts. As each CME contract entails 5 BTC, 1,800 call option contracts were traded at the May 29 expiry, which is equivalent to $90 million. The June 26 expiry currently has an open interest of 800 contracts, roughly $40 million notional. Strikes, or the contract expiry price, were scattered from $9,700 to $13,000.The minimum trade for a $10,000 strike amounts to a $50,000 notional. This sets CME markets apart from other markets where one can trade as little as 0.10 BTC.
What are buyers’ expectations?
Such trades are an undeniably bullish indicator from professional investors sell bitcoin to paypal usd 2020. The total cost of creating such impressive exposure exceeds $5 million. Unfortunately, there is no way to know how many clients were involved.
On the other hand, it is safe to assume such investors built short-term bullish positions. CME options contracts are deliverable, meaning Bitcoin futures contracts will be given out to the call option buyer. Investors can immediately sell those futures, pending market liquidity, although this buying movement indicates potential longer-term market optimism.