The United States Securities and Exchange Commission, or SEC, is expected to decide on October 18 whether or not to approve an application from asset manager ProShare Capital Management for a Bitcoin Traded Fund (ETF).
As previously reported by Cointelegraph, SEC Chairman Gary Gensler recently suggested that the regulator was more inclined to approve indirectly exposed Bitcoin futures ETFs under the Investment Companies Act of 1940.
On October 15, the Nasdaq Stock Market certified the registration of Valkyrie’s Bitcoin Strategy ETF shares to go public. The deadline for the SEC to formally approve Valkyrie’s ETF application is October 25, but it could be extended until December 8.
Call options of $ 70,000 have an implied probability of reaching 25%
Two weeks ago, it would have been difficult to find an investor willing to bet on a Bitcoin (BTC) price of $ 70,000 by October 29. A 62% price increase to $ 43,100 was needed on September 30, and that seemed overkill at the time. Therefore, the October call options at $ 70,000 BTC were traded on September 30 on Deribit for $ 194, or 0.0045 BTC.
Even with the rise in the price of BTC, the implied probability of options (delta) is currently 25%, which may seem bearish at first glance.
Traders shouldn’t take option probabilities at face value
The price of the options depends a lot on the distance from the expiration date. Given Bitcoin’s 4% daily volatility, anything could happen before options expire on October 29. Therefore, traders should not be too obsessed with the implied probability of options (delta).
To better gauge the odds of the Bitcoin ETF being approved by the end of the month, use the $ 50,000 delta as a “baseline” scenario. Traders should assume that a 17% price drop would certainly indicate that the US SEC’s decision has been delayed or rejected.
Considering the $ 50,000 call option is trading at an 84% delta, or implied probability, investors estimate a 16% probability for a doomsday scenario.
Meanwhile, the $ 70,000 call option for October 29 at 8:00 UTC, which indicates the ETF has passed, has an implied probability of 25%. The options markets undoubtedly show a greater chance of a positive movement, but far from certain.