$100000 / bitcoin option products appear: pure gambling or smart people’s choice?

On December 17, 2020, deribit, an American institution, launched a bitcoin call option with a strike price of $100000, delivered on September 24, 2021. By December 21, that is, five days after the launch, the cumulative trading volume has reached 253000 US dollars, of which the largest single transaction volume has reached 81.6 contracts (about 80600 US dollars). For most people, it seems that this kind of call option is a bit of crazy gambling. The price of bitcoin is less than $24000. In just nine months, can bitcoin really rise more than four times to reach $100000? To buy such a $100000 option, the buyer will lose the option premium if it does not rise to $100000 when it matures, and the right to buy bitcoin with the corresponding number of options can be purchased at the guaranteed price of US $100000. Why not buy $24000 of bitcoin now? Would you like to wait for 9 months to buy a $100000 / piece? Are these buyers crazy? First of all, an option contract with such a high delivery price is called “out of the money”. Naturally, this option contract is not aimed at investors who are too rational, but for investors who are more gambling. Because the delivery price is very high, most investors will not expect the final exercise, but will consider selling the option in the middle of the delivery price If it is high, the price of option contract will fluctuate greatly in the middle of the period, and the loss and profit space of investors will be expanded. Obviously, there are three options for speculating on this option contract: first, if the price can’t go up, you will lose the option premium; second, if the overall bitcoin rises sharply, but it does not exceed $100000, you can find a good price point to sell the contract and make a profit; third, when the option contract expires and the bitcoin price does rise by more than $100000, then exercise the option right and buy it Bitcoin for a good price. The implied volatility of the contract, which can be used to measure the future risk of options, has reached 100.6%, which is extremely risky. But clearly, there are many investors willing to gamble. So the investors who buy this $100000 option are not crazy at least. As for whether they are really smart people, only the market can give the final answer. The $100000 bitcoin option can be roughly regarded as a “high-risk and high-yield option product”, which is carefully designed, rather than a crazy product without brain. But in any case, the appearance of nine-month option products of US $100000 / bitcoin shows the optimistic degree of some American institutions for bitcoin in 2021. At present, this kind of option contract is very popular. Taking the open position as an indicator, the open position of this contract ranks the eighth, higher than the contracts with strike prices of $48000 and $64000. Obviously, the possibility of bitcoin unit price rising to 48000 US dollars or 64000 US dollars in the next nine months is certainly greater than that of bitcoin rising to 100000 US dollars. However, the contract of 100000 US dollars is more popular, which itself means a lot. The gambling nature of currency circle investors can be seen from this case. Of course, the emergence of this kind of contract fully shows that there are many bullish mid – and long-term speculators in the current market. This is a product of optimism, and deribit’s smart product based on the optimism in the market. But it is also wrong to say that investors who buy or sell $100000 call options are gambling crazily. Many of them should be smart calculations. For example, holding bitcoin spot and then selling this $100000 call option portfolio is a good investment strategy with a good probability of winning money in 2021 when bitcoin is on the rise in 2021. Obviously, it is a big win to win the option premium and the bitcoin price difference (USD 100000-24000 = USD 76000). However, if the increase does not reach US $100000, it will sell off in the middle and lose the option premium, but it may win part of the bitcoin price difference (for example, if it rises to $50000, winning 50000-24000 = 26000), it is still a small win as a whole. Unless bitcoin goes into a bear market instead, and the price falls below $24, 000, it’s lost. Therefore, although it is a high-risk option, if we do the right direction, the profitability will improve. This is the reason why this kind of “crazy option” is very popular after its launch. With the traditional institutions of Wall Street in the United States entering the bitcoin market one after another, more and more derivative financial products will be launched gradually. Based on the bitcoin market, but developing new derivative markets, this is what Wall Street is good at. Just like the gold market in those years, Wall Street saw the rich and colorful diversification that could be brought about by taking bitcoin as a basic asset Market space, which is more attractive to them than bitcoin spot or contract trading – because developing the market and controlling it can bring more profits. So we see Wall Street vultures swarming in. According to the Bank of America survey of some fund managers who managed $534 billion between December 4 and December 10, bitcoin is now the third most crowded trade, after long tech stocks and short dollars. Therefore, the bitcoin market will become more lively in the future, and more institutions will join in. No matter what kind of business they develop, the minimum bitcoin asset reserve is a necessary prerequisite. This will also be a favorable force for the current bitcoin bull market to develop in depth. They will at least buy part of bitcoin on the field or off-site. On the whole, the bitcoin market will become more and more complex and derivative transactions will be more and more. Unfortunately, most of these derivative transactions can only be carried out legally in the United States, which makes us lose the possibility of using a lot of hedging instruments. Of course, it may be a good thing to think about it in reverse, because if most currency people can use these hedging instruments, they will use them as gambling tools rather than hedging.

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