Bitcoin derivatives point to broad price range play between $85,000-$100,000

Bitcoin's BTC$87,312.10 derivatives market is flashing signals of stability in a broad range rather than a massive moonshot or violent crash.

Activity in Deribit-listed options shows strong support around $85,000 from heavy put selling (writing) or traders offering insurance against price drops below that level.

At the same time, some traders are offering protection against bullish price moves beyond $95,000-$100,000 levels by writing call options at these levels, thereby creating resistance, according to data tracked by market maker Wintermute.

Therefore, volatility could remain contained within this range as both put and call sellers collect premiums from options sales.

"Strong put-selling support around 85k (then 80k/75k as secondary buffers), while call overwrites cap upside around 95k–100k. Vol is being harvested inside this band," Wintermute's Desk Strategist Jasper De Maere, said in an email.

Put selling builds a floor

Put options are contracts that pay out if the underlying asset falls below a set price on or before a specific date. So, traders selling the $85,000 strike put reflects confidence that BTC won't plunge below that level, at least in the near term.

When large number of traders sell puts en masse at a specific level, it often creates a self-fulfilling support.

In BTC's case, the $85,000 put is the second most popular option across all expiries, with a notional open interest of over $2 billion at press time. Notional open interest refers to the dollar value of the number of active contracts at a given time. On Deribit, one options contract represents one BTC.

If prices near that level, its likely that put sellers may buy BTC in the spot or futures market, creating support.

Call overwriting creates resistance

On the higher end, bitcoin holders are selling call options against their long spot positions around $95,000 to $100,000. These "overwrites" generate income in the form of premium received for offering insurance against bullish price moves, but obligate call sellers to deliver bitcoin if prices surge past those levels.

The result: these call sellers could add selling pressure to the spot market if prices near $100,000, making the breakout harder.

So, increased interest in selling the $100,000 strike call suggests limited enthusiasm for a rapid rally into six figures. As of writing, the $100,000 call was the most popular play with a notional open interest of $2.37 billion.

Volatility harvesting in play

"Vol is being harvested," De Maere noted, referring to traders selling both puts and calls to pocket premiums. The strategy essentially generates yield by betting on dwindling volatility – hence the name "volatility harvesting."

These options steadily lose value and expire worthless if bitcoin continues trading sideways, letting sellers keep the full premiums received.

At press time, BTC changed hands at $87,400, according to CoinDesk data.