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A recent $3.2 million options trade involving a "long call butterfly" strategy has emerged, indicating that traders are betting on Bitcoin reaching $95,000 by the end of October. This trade comes as Bitcoin's price has surged to around $85,911.61, inspiring traders to seek further upside potential.
The executed trade involved purchasing options that expire on October 30, specifically targeting prices of $90,000 and $100,000 while selling twice as many calls at the $95,000 strike price. According to data from Laevitas, the trade was carried out through OTC desk Paradigm in five separate transactions, each comprising 1,000 long calls at $90,000, 2,000 short calls at $95,000, and 1,000 long calls at $100,000, resulting in a total initial outlay of $3.17 million.
This strategy is designed to maximize profits if Bitcoin's price hovers around $95,000 at expiry, with a favorable payout range between $90,000 and $100,000. If Bitcoin's price falls outside this range, the trader risks losing the entire $3.17 million investment.
Essentially, the trader is anticipating a rise in Bitcoin’s value from its current level of approximately $85,000 to $95,000 within the next month. This outlook aligns with Bitcoin's daily price chart, which reveals minimal resistance in the price range between $85,000 and $98,000.
Notably, there are no significant price points in this range where Bitcoin has previously experienced resistance or consolidation, suggesting that, barring unforeseen circumstances, the current momentum could push it toward $98,000 soon.
Additionally, this butterfly trade is part of a broader trend of increasing bullish sentiment among traders, as demand for call options has risen, leading to higher short-term risk reversals. Laser Digital noted that risk reversals have been quite volatile, with a shift in favor of calls during Bitcoin's ascent to $85,000, although they receded slightly this morning.
The options market is also reflecting a general preference for volatility across major cryptocurrencies. Coinbase Markets reported that options are currently pricing in expected price fluctuations of 8.9% for XRP, 8.0% for SOL, 6.9% for Ether, and 5.0% for Bitcoin through September 27. These figures indicate anticipated price swings rather than directional bets, with XRP exhibiting the highest volatility risk.
Read more: For analysis of today's activity in altcoins and derivatives, see Crypto Markets Today. For a comprehensive list of events this week, see CoinDesk's "Crypto Week Ahead."