The crypto derivatives market is suggesting continued excitement in the market regarding the potential approval of a spot Ethereum ETH -3.052% ETF by the end of May, an analyst said.

"Traders seem to be adjusting their ether options contracts with the May 23 date in mind," Bitfinex Head of Derivatives Jag Kooner told The Block.

The final approval decision deadline for spot ether ETF applications submitted by asset managers VanEck and Ark/21Shares to the U.S. Securities and Exchange Commission is May 23.

The Bitfinex Head of Derivatives highlighted a noticeable uptick in call side open interest for long-dated options for March, April and May.

"This increase has occurred primarily over the past week and, currently, the put-call ratio is heavily skewed towards the longs at 0.31," Kooner added.

A put-call options ratio below one indicates that the call volume exceeds put volume, signifying bullish sentiment in the market. It is assumed that a trader who buys call options is implicitly bullish on the market, while a put buyer is bearish.

Kooner's observation is supported by The Block's Data Dashboard, where the put-call options ratio for ether across major centralized cryptocurrency derivatives exchanges can be interpreted as a bullish indicator for the future market price of the second largest digital asset by market cap.

However, Kooner also pointed out that other sources are currently suggesting that traders are taking a more cautious approach, predicting that a spot ether ETF approval might not happen until 2025 or 2026.

"The categorization of ether as either a security or commodity is a major factor influencing these predictions and the derivative market's response," he added.

Upcoming ether options expiry dates

Kooner cited derivatives data that shows February's week and month-end expiry dates have a max pain price of around $2,300 for ether while the highest open interest by strike price is around $2,400 - $2,450.

"For long-dated expiry dates, for April-end and longer, the max pain price is higher around $2,400 and we have a heavy call side bias there as well, the highest open interest by strike price is around $2,900," Kooner added.

However, the Head of Derivatives at Bitfinex added that there is an anomaly in ether options open interest in March.

"In March there is a max pain price of around $2,000, and open interest is fairly spread out between $2,000 - $3,000. This means traders are speculating over the short-term and long-term growth but are taking a more cautious approach in the near-term. This could be heavily affected by the Fed's recent statements of not entertaining the possibility of rate cuts before May 2024," Kooner said.

On Sunday, Federal Reserve Chair Jerome Powell ruled out an earlier rate cut in 2024, despite wider markets anticipating the commencement of the central bank's rate-cutting cycle in March.

Options are derivative contracts that give a trader the right but not the obligation to buy or sell the underlying asset at a predetermined price on or before a specific date. A call option gives the right to buy, and a put offers the right to sell. It is assumed that a trader who buys put options is implicitly bearish on the market, while a call buyer is bullish.

Ether's price increased by over 2% on Wednesday, changing hands for $2,395 at 12:00 p.m. ET, according to The Block's Price Page.

The price of ether increased by over 2% on Wednesday. Image: The Block.