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[PLUS] How to Find Bitcoin's Expected Price Move Implied by the Options Market

by CryptoDataDownload



Option Implied Market Movement
The options market is usually one of the more savvy markets as market makers need to have a good understanding of likely price movements in order to stay relatively hedged. When you think of someone with inside information who would like to profit from that information, they are typically going to express that view in the options market where they can lever up the exposure with less capital. Activity in the options market is also less likely to gain attention from the broader market. (This is why we setup our Unusual Options Activity Tracker to highlight options activity that is atypical).

Option implied moves are derived from the At-the-money (ATM) straddle prices. So we will roughly determine which strikes have deltas closest to 0.50 and then use the data for those strikes. Outside of using day-ahead estimations, you could also determine implied movements over a week or month or expiries closest to a known event in the future.

The Code
What we are going to be doing is extracting the Binance option chains data and using it in our calculation. We need to determine what strikes are ATM (which strikes have the delta closest to .50). This may not be the entire option chain and so there could be some variation here. The goal is to recreate what an ATM straddle costs. Once we capture and filter the data, it is a straight forward calculation to estimate the implied daily move. Every line of code is commented. Feel free to modify for timeframes greater than 1 day.

The code will print a final result at the end to the effect of: "The expected/implied price move via the options market for BTCUSDT 1 day ahead is: $319.6"

This is a premium post. Create Plus+ Account to view the live, working codebase for this article.




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THE PERFORMANCE OF TRADING SYSTEMS IS BASED ON THE USE OF COMPUTERIZED SYSTEM LOGIC. IT IS HYPOTHETICAL. PLEASE NOTE THE FOLLOWING DISCLAIMER. CFTC RULE 4.41: HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN. U.S. GOVERNMENT REQUIRED DISCLAIMER: COMMODITY FUTURES TRADING COMMISSION. FUTURES AND OPTIONS TRADING HAS LARGE POTENTIAL REWARDS, BUT ALSO LARGE POTENTIAL RISK. YOU MUST BE AWARE OF THE RISKS AND BE WILLING TO ACCEPT THEM IN ORDER TO INVEST IN THE FUTURES AND OPTIONS MARKETS. DON’T TRADE WITH MONEY YOU CAN’T AFFORD TO LOSE. THIS IS NEITHER A SOLICITATION NOR AN OFFER TO BUY/SELL FUTURES OR OPTIONS. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE DISCUSSED ON THIS WEBSITE. THE PAST PERFORMANCE OF ANY TRADING SYSTEM OR METHODOLOGY IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
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Step into the full potential of your cryptocurrency research and market analysis with CryptoDataDownload. Access free historical data in CSV format, unlock unusual option activity signals, explore Plus+ Python code examples (where every line of code is commented), and tap premium aggregated file resources and bespoke data sets. Trusted by academics worldwide, we offer comprehensive data to empower traders, researchers, and enthusiasts alike.

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