Traders ramp up Ethereum option buying as price looks set to fall below $2200

Against the backdrop of Ethereum’s price falling to a 10-day low, traders began buying put options on the asset to protect against further declines in quotes. This was noted by CoinDesk.

According to Laevitas, on March 7 traders bought on the Deribit platform more than 36,000 derivative contracts expiring on March 18. Of these, more than 20,000 were blocked on Paradigm’s institutional platform.

The notional per contract is 1 ETH; holders of put options will profit if the price of the cryptocurrency falls below $2200 by March 18. This type of derivative gives the buyer the right, but not the obligation, to sell the underlying asset at a pre-set price on or before a specified date.

Long-position holders on the spot or futures markets—large traders—often use the instrument as a hedge against short-term declines. Options are also used for speculation and to profit from price changes within more complex trading strategies. Laevitas believes that the spike in put-option buying on Monday was not related to the latest options.

“Most of them were straight trades, perhaps short-term hedges,” the company said.

Ethereum has been in a downtrend since November, and in January a support level at $2,200 formed, noted CoinDesk analyst Omkar Godbole. At the time of writing the coin was trading near $2,590 (CoinGecko).

Since late January, the Ethereum options market has shown a persistent bearish tilt in the put- and call- contract ratio across all timeframes, added Godbole.

Bitcoin exchange Kraken specialists drew attention to another bearish signal for the cryptocurrency — rising inflows of the asset onto exchanges, which could signal a resumption of selling.

The trend for Bitcoin appears less pronounced, the experts said.

As with digital gold, Ethereum’s price reached a high in November.