Bitcoin’s experience cautions traders against betting bullish on volatility on the day of the ETF approval.
The implied volatility of Bitcoin has significantly decreased after the SEC approved spot ETFs, which is a valuable lesson for volatility traders. Now, the focus is shifting to the optimism surrounding ether ETFs. Traders who are interested in predicting how ether may behave before and after the potential ETF launch should consider monitoring the pricing of options.
Nearly a dozen spot bitcoin exchange-traded funds (ETFs), assets that invest in the actual token, began trading in the U.S. on Thursday. The highly-anticipated investment products came into effect after years of wait as the Securities and Exchange Commission (SEC) approved them on Wednesday.
While several things happened in the weeks leading up to their debut, some related to implied volatility and the options market are worth noting as speculators look at ETH as the next likely candidate for a spot ETF approval.
Implied volatility represents investors’ expectations of price turbulence and positively impacts the prices of call and put options. A call allows buyers to profit from or hedge against price rallies, while a put offers protection against price slides.
Focus on options pricing
Bitcoin rallied over 60% in the three months leading up to the ETF launch. Still, the consensus view early this week dismissed the possibility of a sell-the-fact pullback following the Jan. 10 launch, calling an unabated rally.
Therefore, traders may want to keep track of how ether options are priced as they speculate on the potential launch of an ether spot ETF.