coindesk.com
Bitcoin's ($BTC) price rally may have stalled lately, but bullish conviction certainly hasn't, as whales continue to bet millions on an extended market rally.
Recently, one such whale executed a significant bullish options play targeting $200,000 by the year's end. The strategy involved the simultaneous purchase of 3,500 contracts of the Deribit-listed $140,000 December call option and the short sale (or writing) of 3,500 contracts of the $200,000 December call option.
This complex trade, a bull call spread, resulted in an initial net debit of $23.7 million. As Deribit Insights noted, "The Dec 140-200k Call spread dominates, buying low Dec 140k IV, funded by higher IV 200k Calls."
The strategy will achieve maximum profit if $BTC settles at or above the higher strike price, $200,000 in this case, by the expiration date.
This strategy generates a net debit because the premium paid for the lower strike call option (the purchase) exceeds the premium received from selling the higher strike call. The spread offers limited gains for a limited risk, capping upside at $200,000 while ensuring the maximum potential loss is contained to the initial debit.
Options are derivatives used for speculation or hedging against price movements. A call option gives the purchaser the right, but not the obligation, to buy the underlying asset at a predetermined price on or before a specified future date. A call buyer is implicitly bullish on the market, while a put buyer is bearish.
Bitcoin's spot price reached a record high of over $123,000 on July 14 and has since consolidated in a narrow range between $116,000 and $120,000.
Record options activity
$BTC's price rally and growing institutional interest in structured products, which involve volatility selling, have boosted activity in the options market.
On Deribit, which accounts for over 80% of the global options activity, the $BTC options open interest, or the number of open options contracts, was 372,490 $BTC as of writing – just shy of the record high of 377,892 set in June.
Meanwhile, open interest in ether options has hit a record high of 2,851,577 $ETH, according to data source Amberdata. On Deribit, one options contract represents one $BTC or $ETH.