$ETH $ETH The price of Ether rose 10% between Monday and Tuesday, reaching its highest level in over 15 weeks. Despite this rally, ETH has consistently struggled to surpass the $2,800 mark in the past month. This resistance level coincided with an increase in the use of protective strategies against declines in the ETH derivatives market.
In addition to standard call and put options, traders often use combinations of instruments to design strategies aimed at maximizing gains above certain levels or reducing exposure to losses. As a result, tracking the demand for these options provides insights into how professional traders are positioning themselves.
Traders buy protection against declines in ETH
Open interest in ETH options grew from $6.3 billion to $8.3 billion between the beginning of April and Monday, signaling stronger institutional involvement. Deribit remains the dominant exchange, holding a 72% market share. Therefore, it is essential to analyze the flow imbalance between bearish trades and neutral or bullish strategies.
One of the most notable strategies traded on Deribit in the past two weeks was the 'short risk reversal.' This setup profits from downward price movements while collecting a net premium upfront. It involves buying a put option and selling a call option, protecting against losses below the put's strike.
Another popular strategy is the bear diagonal spread, which expresses a short-term bearish sentiment economically. It involves selling a near-expiry call option and buying a longer-dated call option with a higher strike, aiming to profit from time decay and increased implied volatility.
Ether bulls are optimistic about the monthly options expiration on June 27, especially since call options represent 63% of the total open interest. Currently, 92% of Ether put options are positioned at $2,700 or less, levels that would expire worthless if ETH trades above that mark at expiration.
Part of the market's caution may be attributed to the 49% increase in Ether's price since May, while competitors like Solana (SOL) and XRP rose by 8% and 2%, respectively. Traders fear that ETH's competitive edge may be diminished if the U.S. Securities and Exchange Commission (SEC) approves exchange-traded funds (ETFs) for rival altcoins.
Bitcoin continues to 'suck' the attention away from altcoins
Concerns about Ether's institutional appeal also arose after Trump Media and Technology Group, a company largely controlled by U.S. President Donald Trump, announced a $2.5 billion issuance of debt and equity to build a Bitcoin reserve.
Growth of the Ethereum network, inflows into spot ETFs, and rising prices attract new investors
Adding to the narrative shift, Bo Hines, executive director of the U.S. President's Advisory Council on Digital Assets, stated on Monday that details about the U.S. Strategic Bitcoin Reserve would be shared 'soon,' emphasizing that the 'community will be extremely pleased.'
Despite the growing demand for protection against declines in ETH options, this does not necessarily imply that traders are betting on price drops. With most put options expiring on June 27 targeting levels below $2,700, neutral to bullish strategies seem to have an advantage, providing a support backdrop for ETH's price.