How does option parity affect the price volatility of cryptocurrencies?

1 answers

• Jan 20, 2022 · 3 years ago
  Option parity has a significant impact on the price volatility of cryptocurrencies. When call and put options are in parity, it indicates a balanced market sentiment and can contribute to lower price volatility. This is because there is a general consensus among traders regarding the future price movements. However, when there is an imbalance between call and put options, it can lead to increased price volatility. For example, if there is a higher demand for call options, it suggests a bullish sentiment and can drive up the price of cryptocurrencies. This increase in price can result in higher volatility as traders react to the changing market conditions. Conversely, if there is a higher demand for put options, it indicates a bearish sentiment and can lead to downward price pressure and increased volatility. Therefore, option parity is an important factor to consider when analyzing the price volatility of cryptocurrencies.
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