Bitcoin Options Market Reacts to U.S. Presidential Election: Analysts Predict Increased Volatility

Insights from Analysts: Bitcoin Options Activity and Its Correlation with Trump’s Odds

Bitcoin Options – As the U.S. presidential election approaches, analysts have observed a notable increase in bullish bets through long out-of-the-money (OTM) call options for Bitcoin. These options are primarily focused on expirations occurring after the election, reflecting heightened trader expectations.

Increased Premium on Bitcoin Options

One analyst noted an estimated 8% premium on Bitcoin options expiring post-election, driven by anticipated risks surrounding the event and correlations with Donald Trump’s election odds. This premium illustrates traders’ concerns and expectations of significant market movements following the election.

Heightened Expectations of Volatility

The options market indicates that traders are bracing for increased price fluctuations in Bitcoin as the election date approaches. Implied volatility, a metric that measures expected future price movements, has risen significantly. Derivatives traders are speculating on potential price upswings or hedging against possible downside risks for options that expire after November 5, the election day.

Focus on Quarterly Expiries

Analyst Rick Maeda from Presto Research highlighted that much of the bullish activity is centered on call options set to expire at the end of the quarter, particularly on December 27. He noted a clear uptick in longer-term bullish bets, stating, “Trump’s implied election odds from Polymarket hit their highest levels since early August this week.”

Maeda added, “Long OTM call flows for the next two quarterly expiries show a notable increase, with 64.53% of flows targeting the December 27, 2024, expiry and 79.79% for the March 28, 2024, expiry. This signals a strong bullish outlook ahead.”

Caution in the Futures Market

In contrast to the options market, the futures market presents a more cautious narrative. Maeda remarked, “Futures traders seem to be fairly cautious heading into the U.S. election due to uncertainties surrounding both the election and the Federal Open Market Committee (FOMC) meeting two days later.” He indicated that open interest in Bitcoin perpetual futures has remained relatively stable since Q2, with funding rates not skewed toward extreme positions.

“The 10-day average annualized OI-weighted and volume-weighted funding rates are currently in the low 7% range, a stark contrast to the 50% plus level from early March this year when positioning was extremely long,” Maeda explained.

Election Premium Influencing Option Prices

Darius Tabai, co-founder of Vertex, emphasized the growing cost of Bitcoin options set to expire after the election. He noted that options expiring around key dates like November 8 and December 27 carry a premium, reflecting market expectations for significant price swings.

“The spike in forward volatility demonstrates that the market is pricing a premium for the election and expects event risk surrounding the results,” Tabai stated. He pointed out that this indicates a clear market expectation of a substantial impact from the U.S. elections on the crypto landscape.

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