Massive bet on Ethereum was placed on options market
The co-founder of Three Arrows Capital has shared some interesting data suggesting that someone has opened a massive offer on Ethereum calls Dec2022, which suggests that Ethereum will reach $7,000 (strike price) by the end of the year.
Options are quite popular among professional traders and allow receiving a massive profit in a relatively short period. Quite often, such a large call on a price increase may be a part of a hedge position opened at the same time as a short-order.
Even though options are often used as a hedging tool, this is unlikely to be the case today as the size of the initial short position would be massive; traders normally use around 5% of the initial position to hedge. In this case, the initial position would be around $36 million, which would have been noticed by market watchers.
The reason behind opening such a large position may be because of insider trading or a really firm belief in the second largest cryptocurrency on the market. But sometimes traders use options contracts like trading tools.
For example, the price of each call contract increases each time the price of the underlying asset approaches the strike price. In this case, the value of the contract entered into by a trader will increase exponentially, even if Ethereum cannot reach $7,000.
Unfortunately, Ethereum has failed to deliver a powerful performance at the beginning of 2022 and now trades with a 36% loss since the end of 2021. Such a large discount does not seem to satisfy the demands of investors, which is why new funds are being poured into Ethereum.
