According to Data Analytics firm: Skew, Bitcoin is headed for Christmas day volatility. A Bitcoin option contract worth huge amounts is set to expire on 25th December 2020. How huge you ask? The option contracts are in fact of the biggest amount recorded to date. The contract will execute a call or put of 100,000 Bitcoins. In today’s trading price it is worth $2.3 Billion!
Bitcoin Option Contact explained in brief
A Bitcoin Option Contract binds two parties in an agreement. The buyer of the option contract holds the right, but not an obligation to buy or sell Bitcoin, depending on whether the buyer holds a call or a put option. The contract is executed at the strike price — the buyer of the option contract has the sole right to execute a call option to buy underlying security here Bitcoin or to execute a put option to sell Bitcoin.
Generally, investors enter the option contracts to hedge risks associated with an underlying asset. Investors enter the call option if they believe Bitcoin prices are going to go up in the future. They enter the put option on the other hand if they believe that Bitcoin prices are going to decline in the future.
Expiry of a contract is generally a volatile event for Bitcoin as even profitable traders may execute put options to receive a payout on the execution of options contract.
The market is headed for Volatility this week, but experts believe that Bitcoin will remain supported by Institutional Investments and Bull Run.
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