Bitcoin options market cautious as traders hedge against volatility

The Bitcoin options market has quietly become one of the most obvious places to gauge trader sentiment. And now it’s blinking mixed, but conveying a signal. Bitcoin has managed to recover from an early October crash that evaporated tens of billions of dollars in leveraged bets, but options data suggests investors are still cautiously hedging their excitement.

After the review, the term structure will be flattened.

The backdrop to all of this is a market that continues to digest one of the most rapid deleveraging events in crypto history. After the October crash wiped out more than $19 billion in leveraged positions and pushed futures open interest to its lowest point in months, it has slowly recovered as traders repositioned their positions. Glassnode’s latest Options Weekly shows that open interest has reset and is rising again heading into Q4. This is what we call a “cleaner” market structure, without the noise of expirations.

But the term structure of volatility, or the way traders price risk over time, has become steeper again on the short-term side. Short-term implied volatility remains elevated, hovering near 50%. This means that traders are paying short-term insurance premiums, indicating they are wary of further shocks rather than believing in a smooth recovery.

Skew indicates downward bias

Skew is an indicator that measures whether a trader prefers an upside call or a downside put. The same story is reflected. Glassnode points out that even after Bitcoin briefly rebounded to around $120,000, put demand remains strong, with the 25 delta skew moving several volume points higher for downside protection. According to Glassnode, financial institutions are making these hedging moves while strengthening their profits, which is a sign of “defensiveness” rather than capitulation.

In other words, the market is not calling for risk-off, but it is cautious in looking for upside. Traders are paying attention to macro catalysts and staying protected. This is in stark contrast to early 2025, when short volatility strategies were the norm.

Carry trade is declining

The once lucrative volatility carry trade (shorting options to earn a premium because realized volatility is dormant) has virtually disappeared. Now that realized and implied volumes have converged, that easy income is gone and traders must actively manage their exposure rather than simply collecting yield.

Volatility in October, driven by President Trump’s new tariff threats against China, swung implied volatility from 40% to over 60%. Although it has cooled slightly, it is still well above pre-impact levels. The persistence of this implied volume suggests that traders remain concerned about liquidity and the risk of automatic releveraging.

Defensive flows dominate Bitcoin options

Recent options flow confirms that the market’s bias is still on the defensive. Approximately $31 billion in Bitcoin options are set to expire the week of Halloween, making it one of the largest expirations on record. What matters is how these contracts are structured. Puts are concentrated around the $100,000 strike and calls are concentrated around the $120,000 strike, almost perfectly surrounding Bitcoin’s recent range. Dealers have short gamma on the downside and long on the upside, and this setting tends to limit upside and intensify selling.

A Bloomberg report from early October stated that traders rushed into $140,000 calls while Bitcoin rallied above $126,000. But as the bull market faded, that bullish momentum was replaced by hedging and profit-taking.

Waiting for CPI

For now, the next big volatility reset will depend on macro data. Traders are holding off until the next U.S. Consumer Price Index (CPI) report is released after the government shutdown backlog is cleared, which is likely to shape volatility pricing across assets. Glassnode analysts point out that this compressed setup, increased front-end volatility, defensive distortion, and carry fade-out means that macro shocks can quickly send the market back to its extremes.

in short? The Bitcoin options market has lost its euphoria and is showing more wisdom. Traders have learned from October’s shock and are balancing “uptober” optimism with an unusually calm approach to risk. Volatility isn’t gone, it’s just better managed.