In a market characterized by unstable price movement and uncertainty, major traders of key cryptocurrencies quietly choose different paths.

While Bitcoin investors

BTC

$102 527.96

prepare for volatility with non-directional options strategies, some traders

XRP

$2.4662

they bet on the opposite, showing recent large trades in the crypto options market.

Over the past week, strangles accounted for 16.9% of the options trading volume on Bitcoin on the platform, while straddles accounted for 5%. Both strategies are non-directional volatility strategies, betting on significant price movements both up and down. XRP traders, on the other hand, opened short positions in strangles, effectively betting against rising volatility.

A strangle involves buying out-of-the-money (OTM) call and put options with the same expiration date but different strike prices, equidistant from the spot price, providing a cost-effective way to profit from large swings. For example, if the spot price is $104,700, simultaneously buying a call option with a strike price of $105,000 and a put option with a strike price of $104,400 constitutes a long strangle.

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A straddle involves buying call and put options in the market, with the same strike price, leading to a higher initial cost but providing greater sensitivity to volatility.

Both strategies can lead to the loss of premiums paid if the expected volatility does not materialize. Note that the bet here is on volatility and does not necessarily imply a bullish or bearish price outlook.

According to Deribit CEO Luke Striers, collectively these non-directional strategies in BTC exceed 20% of the total flow of block trades, which is unusually high.

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"This indicates a market that is facing uncertainty, where traders expect significant price movements but remain in the dark regarding the direction," said Striers.

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Large block options are large, privately negotiated trades involving significant volumes of options contracts, typically executed off the open market to minimize their impact on price. Such trades are predominantly conducted by institutional investors or large traders and allow for significant positions to be executed discreetly without provoking market volatility or prematurely revealing trading intentions.

The preference for non-directional strategies underscores why the cryptocurrency options market thrives: it allows traders to speculate on volatility alongside price direction, facilitating more effective risk management.

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The options market for BTC on Deribit is valued at over $44 billion in terms of nominal open interest, providing crypto traders with the most liquid tool for hedging risks and speculation.

The Ethereum market

ETH

$3,435.06

valued at over $9 billion and has shown a tendency to use diagonal spreads with puts over the past week.

This is best classified as a strategy with a directional to neutral position that profits from time (theta) decay while having positive exposure to implied volatility. In other words, while it is not purely a volatility strategy, volatility plays a role in potential profits.

In the case of ETH, straddles and strangles together accounted for just over 8% of the total block volume over the past week.

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Bet on the range of XRP

The options market for XRP on Deribit remains relatively small, with nominal open interest around $67.6 million. Large block trades occur infrequently, but when they do, they are typically significant enough to attract market attention upon their occurrence.

For example, on Wednesday, a short strangle trade on XRP was executed on the over-the-counter market Paradigm, which was subsequently recorded on Deribit. The transaction included the sale of 40,000 call option contracts with a strike of $2.2 and 40,000 put option contracts with a strike of $2.6, expiring on November 21, totaling 80,000 XRP at an average premium of 0.0965 USDC.

A short strangle is a bet on volatility contraction, and a trader using a short strangle believes that macroeconomic risks are already priced into the market, according to Lin Chen, head of business development at Deribit in Asia.

"Cryptocurrency volatility remains generally elevated amid an overall decrease in risk caused by macroeconomic uncertainty, including the U.S. government shutdown and its reopening dynamics, as well as expectations of a rate cut in December," Chen noted in an interview. "The implied volatility of the XRP option with the current strike price has exceeded 80%, reflecting this heightened uncertainty."

"The trader is essentially betting that these macroeconomic risks are already fully priced in. In his view, XRP will remain within the range of $2.2 to $2.6, and the yield from selling the strangle looks particularly attractive," Chen added.

Selling a strangle strategy can be costly if volatility unexpectedly increases, potentially leading to unlimited losses if the underlying asset moves sharply beyond the strike prices.

Due to this significant risk, short strangles are generally considered high-risk trades unsuitable for most retail investors unless they have reliable risk management and a high tolerance for potential losses.