Net Buying Pressure and the Information in Bitcoin Option Trades

Carol Alexander, Jun Deng, Jianfen Feng and Huning Wan

Papers from arXiv.org

Abstract: How do supply and demand from informed traders drive market prices of bitcoin options? Deribit options tick-level data supports the limits-to-arbitrage hypothesis about the market maker's supply. The main demand-side effects are that at-the-money option prices are largely driven by volatility traders and out-of-the-money options are simultaneously driven by volatility traders and those with proprietary information about the direction of future bitcoin price movements. The demand-side trading results contrast with prior studies on established options markets in the US and Asia, but we also show that Deribit is rapidly evolving into a more efficient channel for aggregating information from informed traders.

Date: 2021-09, Revised 2022-03
New Economics Papers: this item is included in nep-isf, nep-mst and nep-pay
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Citations: View citations in EconPapers (4)

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Journal Article: Net buying pressure and the information in bitcoin option trades (2023)
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