Everyone is cheering for the BTC ETF, but options markets data shows that the implied probability for Bitcoin trading above $70,000 on Oct. 29 is just 25%.
The United States Securities and Exchange Commission, or SEC, is expected to rule on Oct. 18 whether to approve an application from asset manager ProShare Capital Management for a Bitcoin exchange-traded fund (ETF).
As previously reported by Cointelegraph, SEC Chairman Gary Gensler recently suggested that the regulator is more inclined to approve indirect-exposure Bitcoin futures ETFs under the Investment Company Act of 1940.
On Oct.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 Oct. 25, but this could be extended to Dec. 8.
$70,000 call options see their implied probability hit 25%
Two weeks ago, it would have been a daunting task to find an investor willing to bet on a $70,000 Bitcoin (BTC) price for Oct. 29. A 62% upside was needed from the $43,100 price on Sep. 30, and this seemed far-fetched at that time. Therefore, the Oct. $70,000 BTC call (buy) options traded on Sep. 30 at 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 rallied by 39% month-to-date to $60,000. So, even though this is still a long way to go for the $70,000 call option, the odds have significantly increased.
Even with the BTC price increase, the implied options probability (delta) currently sits at 25%, which might sound bearish at first sight.
Traders should not take options probabilities literally
Options pricing is heavily dependent on how distant the expiry date is. Considering Bitcoin’s 4% daily volatility, anything can happen ahead of the Oct. 29 options expiry. Therefore, traders should not fixate too much on options implied probability (delta).
To better assess the odds of Bitcoin’s ETF approval by the end of the month, one should use the $50,000 delta as the ‘base’ scenario. Traders should assume that a 17% price drop would definitively signal that the decision by the U.S. SEC was either delayed or rejected.
Considering that the $50,000 call option is trading at an 84% delta, or implied probability, investors are pricing a 16% odds for a doomsday scenario.
Meanwhile, the $70,000 call option for Oct. 29 at 8:00 am UTC, which indicates that the ETF has been approved, presents a 25% implied probability. Options markets undoubtedly show higher odds for a positive move, but far from a certainty.