$1.25 billion options expiration today

A large number of Bitcoin (BTC) and Ethereum (ETH) options are expiring today. Let’s figure out how this will affect the price of underlying assets.

Cryptocurrency options are derivative contracts that allow traders to buy or sell an asset at a specific price on a specific expiration date. If the option owner decides not to buy or sell cryptocurrency, he is not obligated to do so. This makes options more flexible than futures, which require you to close a position regardless of profit or loss.

The notional value of the soon-expiring 18,000 BTC contracts and 260,000 ETH contracts is $1.25 billion and $1 billion, respectively. We are looking into whether expiration can provoke increased volatility in the market and affect the price of the two largest cryptocurrencies by capitalization.

There is optimism in the market

According to Greeks.live, the BTC put to call ratio remains at 0.67. This means traders are still bullish and the number of calls, or long contracts, is outnumbering the number of puts, or short contracts. The maximum pain point – that is, the price at which the asset will cause financial losses to the largest number of holders – is at $70 thousand, which is quite close to the current price.

The put/call ratio on Ethereum, meanwhile, is 0.64, with the maximum pain point at $3,650.

Greeks.live analysts note that against the backdrop of a rate cut by the ECB and the Bank of Canada, as well as expectations of the imminent launch of ETF trading on ETH, the atmosphere in the market has become much more optimistic.

What will happen to the price of BTC during expiration?

Bitcoin has shown impressive performance this week, rising from $67,600 to $71,700 amid renewed inflows into spot ETFs. At the time of writing, BTC is trading at $71,250, up 0.3% over the past 24 hours.

Ethereum, meanwhile, is still unable to return to $4,000 despite the long-awaited approval of eight ETH spot ETFs.

It is quite difficult to predict how the market will behave on the expiration day of a large number of contracts, especially if any events are added that affect the news background. However, traders need to closely monitor the situation to ensure that increased volatility does not lead to unwanted stop loss orders or poor trading decisions.

We should not forget that the impact of option expiration on the price of the underlying asset is short-term in nature. As a rule, the very next day the market will return to its normal state, and strong price deviations will be compensated.