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Analyst: Investors still prepared to pay premium for short-term downside protection

Analyst: Investors still prepared to pay premium for short-term downside protection

Bitget2024/05/16 16:07

CF Benchmark analysts say investors are still prepared to pay a premium for short-term downside protection, even though Bitcoin broke above the $66,000 mark after yesterday's inflationary weakness. Implied volatility remains higher for out-of-the-money puts compared to calls. Derivatives traders are willing to pay higher premiums for out-of-the-money (OTM) puts, which is an indicator of a bearish short-term market. The increase in implied volatility (IV) of OTM put options suggests that traders are essentially hedging against a potential decline in the value of bitcoin.

Analysts noted that the volatility curve between long-term puts and calls is "flatter," while calls are slightly skewed. "This suggests that investors are more optimistic about the long-term outlook for bitcoin, and if deflationary expectations begin to accelerate following a favorable Consumer Price Index report, it will be worth watching to see if call option bias increases."

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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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