The put-call open interest ratio, which measures the number of put options open relative to call options, fell to 0.43 on Thursday – the lowest since March 24, according to crypto derivatives research firm Skew. The data takes into account open interest at leading derivatives exchanges Deribit, OKEx, CME, LedgerX and Bakkt.
“The put-call ratio can gauge the overall sentiment of traders and the lower ratio dictates that more traders are buying calls (bullish bets) than puts (bearish bets),” according to Lennard Neo, head of research at Stack, a provider of cryptocurrency trackers and index funds. “The decline toward 0.4 indicates that some form of bullishness is building,” he said.
Traders usually buy calls when the market is expected to rise and buy puts when prices are likely to fall. That said, experienced traders often sell calls when the market is expected to remain range-bound and not rise beyond a certain level. Selling a call or put can be equated to selling a lottery ticket, where the maximum profit for the seller is the ticket price. The loss is huge if the buyer wins the lottery.
This content was originally published here.