Implied volatility, which measures anticipated price changes, has risen significantly. Derivatives traders are likely positioning themselves for potential upward moves or hedging against downside risks, particularly for options set to expire after November 5, the election date.
Presto Research analyst Rick Maeda noted that much of this activity is centered on call options expiring by the end of the year, particularly those with expiration dates of December 27 and March 28, 2024. Maeda observed a marked rise in bullish sentiment, as seen in longer-term call options. “Trump’s implied election odds from Polymarket reached their highest levels since early August this week,” he said. “The long out-of-the-money (OTM) call flows for the next two quarterly expiries are showing a notable increase, with 64.53% targeting December 27, 2024, and 79.79% for March 28, 2024. This points to a strong bullish outlook,” he added.
However, Maeda noted that futures traders are showing more caution. “The futures market tells a more cautious story,” he said, attributing the uncertainty to both the election itself and the Federal Open Market Committee (FOMC) meeting scheduled two days later. He pointed out that open interest in bitcoin perpetual futures has remained steady since Q2, with funding rates much lower than during the speculative spike in early March, when positioning was overwhelmingly long.
Election Premium Drives Up Bitcoin Option Prices
Vertex co-founder Darius Tabai also highlighted the rising costs of bitcoin options expiring after the election, particularly around November 8 and December 27. “The market is pricing in a premium due to the election and expects significant volatility around the results,” Tabai explained. “The surge in implied volatility reflects traders’ efforts to either speculate or hedge against this potential risk.”
Presto Research further confirmed this “election premium,” estimating an 8% rise in implied volatility ahead of the election. “The market expects increased volatility during this period,” they noted, adding that this spike in volatility is loosely correlated with Trump’s odds in prediction markets.
