• DOI:10.2139/ssrn.3915901
• Corpus ID: 237434284

Net Buying Pressure and the Information in Bitcoin Option Trades

@article{Alexander2021NetBP,
  title={Net Buying Pressure and the Information in Bitcoin Option Trades},
  author={Carol Alexander and Jun Deng and Jianfen Feng and Huning Wan},
  journal={Econometric Modeling: Derivatives eJournal},
  year={2021}
}

• C. Alexander, Jun Deng, +1 author Huning Wan
• Published 1 September 2021
• Economics
• Econometric Modeling: Derivatives eJournal

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 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.