Bitcoin options traders think that there won’t be much instability around the Nov. 5 election for president of the United States, but they do expect a rally at the end of the year that could take the cryptocurrency as high as $100,000.
The biggest cryptocurrency, BTCUSD 4.49%, traded at about $65,705 on Monday. It is up 56% so far this year, but it is still 11% below its all-time high of $73,798 set in March.
But the S&P 500 SPX 0.72% is up 22.8% so far this year and the Dow Jones Industrial Average DJIA 0.39% is up 14.3% so far this year.
As of today, traders are selling both put options and call options for bitcoin that expire on November 8 with strike prices of $60,000 and $65,000, respectively. A call option gives the owner of the contract the right, but not the duty, to buy the underlying commodity by the expiration date at a certain price. You can sell with a put option too.
Greg Magadini, director of derivatives at Amberdata, says that this could mean that traders are getting ready for a “short-strangle trade.” In this case, a trader sells a call option with a higher strike price and a put option on the same underlying asset with a lower strike price. Both options have the same expiration date.
Traders usually use this approach when the market isn’t very volatile. This is because they can get the most money from both options if the underlying asset trades between the two strike prices at expiration, which means that neither option is worth anything.
The trader would lose money if the price of the asset moved significantly above or below the strike prices for calls and puts. This is because they would have to buy or sell the underlying asset if the options are triggered.
Magadini said, “The options market feels that the election itself, like the day of the election, is going to have less of an effect than after the election.”
Call options that expire in December and have strike prices between $65,000 and $100,000 are being bought by crypto options players in the same way. Magadini said that they are “betting that we’ll rally through the end of the year.”
A lot of people in the crypto market think that the election will be good for digital assets.
Trump, the Republican nominee and past president, has said many times that he supports crypto and promised to build a bitcoin reserve in the U.S. Alex Thorn, head of firmwide research at Galaxy Digital, says that if Kamala Harris, the Democratic nominee for president and vice president, were to win, her government could still be “slightly more supportive than a Biden presidency.”
It’s unlikely that bitcoin and other cryptocurrencies will go down much because of the election, but they could go up a lot if Trump wins, Thorn wrote in a recent note.
