While positive US inflation data released earlier in the week has increased institutional investors’ confidence in Bitcoin’s (BTC) long-term uptrend, it has yet to assuage concerns about a price pullback in the short term.

Implied volatility for short-term out-of-the-money (OTM) put options is higher than for OTM call options following lower-than-expected U.S. consumer price index (CPI) data, according to CF Benchmarks analysis of options trading data on the Chicago Mercantile Exchange (CME). These options are based on CME’s standard Bitcoin futures contract with a size of 5 BTC.

“The volatility slope, which shows the difference in implied volatility between out-of-the-money (OTM) put and call options, is quite pronounced in shorter-dated options. The higher implied volatility (demand) for OTM put options compared to call options is still a factor for investors,” CF Benchmarks said in a note on Thursday. “It shows that they are cautious about short-term downside risks and are willing to pay a premium for protective puts,” he said.

Put options are derivative contracts that protect the buyer against price declines. A put option buyer has an implicit bearish bias on the market and seeks to take advantage of or hedge against potential price weakness. A call option protects against price increases. Put options at values ​​below market value and call options at values ​​above market value are considered worthless.

Implied volatility is an estimate of the future volatility of the underlying asset based on option prices. As demand for options increases, implied volatility increases.

CF Benchmarks is a UK regulated provider of digital asset indices such as the CF Bitcoin Volatility Index. CF Benchmarks and CME also publish several crypto-related reference rates, including the CME CF Bitcoin Reference Rate and the CME CF-Ether Dollar Reference Rate.

The volatility surface – a three-dimensional plot of the implied volatility of Bitcoin options – shows the implied volatility for short- and long-term Bitcoin options with different delta values, or different sensitivities to changes in the Bitcoin price. The delta value of options with no intrinsic value varies between 0.5 and 0.

As can be seen, there is a trend towards out-of-the-money put options expiring 20 to 40 days after US inflation data. Meanwhile, as we move towards longer-dated options, the bias shifts in favor of call options or bullish bets.

“This suggests that investors are becoming more optimistic about Bitcoin’s long-term prospects and are willing to pay more to position themselves for potential upside by purchasing intrinsically worthless call options,” CF Benchmarks said.

“This could be interpreted as a sign of increased institutional involvement by these investors, who generally have a more nuanced view of the market and are less prone to extreme emotional swings,” CF Benchmarks added.

A similar long-term bullish trend is seen in options trading on cryptocurrency exchange Deribit, which accounts for over 85% of global crypto options. At the time of writing, the dollar value of the number of open Bitcoin option contracts, or notional open interest, on Deribit was $15.63 billion. Meanwhile, open interest in CME options was $417 million. At the time of writing, Bitcoin was trading at $65,550, representing a weekly gain of 6.6%.