The Bitcoin (BTC) options market has recently shown strong demand for call options, reflecting optimism about the upcoming U.S. elections, particularly the November 4 election event.

Data shows that short-term Bitcoin options on Deribit show a clear preference for call options, indicating that market participants expect Bitcoin prices to rise. This situation means that many traders hope to profit from volatility during the election and are optimistic about the upside of Bitcoin prices. However, at the same time, the S&P 500 index options market sends a completely different signal. Data shows that short-term options are more biased towards put options, indicating that stock market investors have strong concerns about future price declines.

Increased demand for put options generally means that investors want to protect against market declines and may anticipate uncertainty in the stock market during the election. The positive correlation between price volatility of Bitcoin and the S&P 500 has long been widely accepted, meaning that the two tend to move in sync with each other in price movements.

However, this positive correlation appears to be facing a test as pricing trends for Bitcoin and S&P 500 options move in different directions. The CEO of Block Scholes noted that the divergence between BTC and the S&P 500 is a sign of potentially greater volatility in the future.

This divergence may lead to two scenarios:

First, the correlation between Bitcoin and the S&P 500 will be broken, and may even turn negative;

Second, a market may have made a mistake in pricing. At present, this uncertainty makes market participants pay great attention to future trends.

In particular, will the market usher in a decoupling of Bitcoin from the stock market, or will traders in one market face greater risks and surprises. In addition to the bullish option preferences brought about by election expectations, some cryptocurrency traders are also "selling volatility."

For example, according to data from crypto liquidity provider Wintermute, the implied volatility (IV) of election options expiring on November 8 has fallen from 62% annualized to 55%. This decline in IV is a sign that traders are adopting volatility-bearing strategies, indicating that they are not expecting large price swings. In fact, these traders are betting that prices will fluctuate in a relatively stable range by selling straddles and strangles. Traders who choose this strategy usually hope to profit by collecting option premiums when price fluctuations are not large.

However, this strategy comes with risks. If the market moves wildly, traders who sell straddles and strangles could face losses, especially if volatility exceeds expectations. Still, these types of volatility trades can be attractive to traders with large amounts of capital.

In the traditional market, facing the fierce presidential election, many traders bet on rising volatility by buying VIX call options on the Chicago Board Options Exchange. The VIX index is often called the "fear index" and reflects the market's expected volatility level. If the US presidential election triggers market uncertainty, it is expected that the VIX may rise sharply, which will in turn affect the overall stock market.

In general, as the US election approaches, the expectations of the future trend of the Bitcoin options market and the traditional stock market options market have diverged. The rising demand for Bitcoin call options shows that traders are optimistic about the prospects of the crypto market; while in the S&P 500 options market, the increasing demand for put options indicates that the stock market remains cautious about the uncertainties that may face in the future.

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