The United States Securities and Exchange Commission, or SEC, is expected to decide on October 18 whether to approve an application from asset manager ProShare Capital Management for an exchange-traded Bitcoin fund (ETF).
As previously reported by Cointelegraph, the SEC chairman, Gary Gensler recently suggested that the regulator is more likely to approve Bitcoin futures ETFs. indirect exposure under the Investment Companies Act of 1940.
On October 15, The Nasdaq Stock Market certified the registration of Valkyrie’s Bitcoin Strategy ETF shares for listing. The deadline for the SEC to officially approve Valkyrie’s ETF application is October 25, but it could be extended to December 8.
$ 70,000 call options see their implied probability reach 25%
Two weeks ago, it would have been a daunting task to find an investor willing to bet on a price of $ 70,000 per Bitcoin (BTC) by October 29. A rise of 62% was needed from the price of $ 43,100 on September 30, and this seemed far-fetched at the time. Therefore, call options of $ 70,000 per BTC were traded on September 30 on Deribit for $ 194, or 0.0045 BTC.
As shown above, the same option is currently trading at $ 1,570, or 0.0262 BTC, as Bitcoin is up 39% so far this month to $ 60,000. So while it’s still a long way to go for the $ 70,000 call option, the odds have increased significantly.
Even with the rise in the price of BTC, the implied probability of the options (delta) is currently 25%, which might seem bearish at first glance.
Traders should not take option probabilities at face value
The price of the options largely depends on the distance from the expiration date. Considering Bitcoin’s 4% daily volatility, anything can happen before the options expire on October 29. Traders should not pay too much attention to the implied probability of options (the delta).
To better assess the odds of the Bitcoin ETF being approved at the end of the month, the $ 50,000 delta of options should be used as the “base” scenario. Traders should assume that a 17% price drop would be the definitive signal that the US SEC’s decision is delayed or rejected.
Considering that the $ 50,000 call option is trading with an 84% delta, or implied probability, investors are pricing a 16% probability for a catastrophic scenario.
In the meantime, the $ 70,000 call option for October 29 at 8:00 am UTC, indicating that the ETF has been approved, has an implied probability of 25%. Options markets undoubtedly show greater odds for a positive move, but they are far from a certainty.
The views and opinions expressed here are solely those of the Author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trade move involves risk, you should do your own research when making a decision.
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