The United States Securities and Exchange Commission, or SEC, is expected to rule on October 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 regulator is more willing to approve Indirect Exposure Bitcoin Futures ETFs under the Investment Company Act of 1940.
On October 15, the Nasdaq Stock Exchange certificate registration of Valkyrie's Bitcoin Strategy ETF shares to trade. The deadline for the SEC to officially approve Valkyrie's ETF application is October 25, but it could be extended to December 8.
$ 70,000 call options see their implied probability reaching 25%
Two weeks ago, it would have been a daunting task to find an investor willing to bet on a $ 70,000 Bitcoin (BTC) for October 29. A 62% increase was needed from the $ 43,100 price on September 30, and this seemed implausible at the time. Therefore, the October $ 70,000 BTC call options were traded on September 30 on 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 39% so far this month at $ 60,000. So while there is still a long way to go for the $ 70,000 call option, the odds have increased significantly.
Even with the rise in the price of BTC, the probability of embedded options (delta) currently stands at 25%, which may seem bearish at first glance.
Traders should not take option probabilities literally
The price of options largely depends on how far the expiration date is. Considering Bitcoin's 4% daily volatility, anything can happen before the options expire on October 29. Therefore, traders should not pay too much attention to the implied probability (delta) options.
To better assess the Bitcoin ETF approval probabilities by the end of the month, the $ 50,000 delta should be used as the 'base' scenario. Traders should assume that a 17% price drop would definitely indicate that the US SEC's decision was delayed or rejected.
Considering that the $ 50,000 call option is trading at an 84% delta, or implied probability, investors are pricing a 16% probability for an apocalyptic scenario.
Meanwhile, the $ 70,000 call option for October 29 at 8:00 am UTC, indicating that the ETF has been approved, presents an implied probability of 25%. Options markets undoubtedly show a greater likelihood of a positive move, but it is far from a certainty.
The views and opinions expressed here are solely those of the Author and do not necessarily reflect the views of Cointelegraph. Every investment and trade movement involves risk. You should do your own research when making a decision.
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