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87,000 BTC and 880,000 ETH contracts expire 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 29,000 BTC contracts and 230,000 ETH contracts is $1.13 billion and $470 million, 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.

Traders are focused on the imminent launch of a Bitcoin ETF

According to Greeks.live, the ratio of put and call options on BTC remains at 0.58. The maximum pain point, that is, the price at which the asset will cause financial losses to the largest number of holders, is located at $37,000. Thus, the option delivery price this week is quite close to the maximum pain point.

The Ethereum options put/call ratio is 0.49 and the maximum pain point is $2,100.

However, Greeks.live analysts believe that the optimistic mood of market participants is fading.

“Looking at the options data, we see that the put-call ratio is low, suggesting that the main trades this week have been focused on call options, with the maximum pain points close to the strike price. Fewer and fewer investors are bullish for near-term growth, with expectations focused on January ETF approvals,” they commented.

What will happen to the price of BTC and ETH during expiration?

The last few days have been good for Bitcoin holders. This week, the asset updated its annual maximum and at the time of writing is trading at $38,110.

Ethereum, in turn, has consolidated above $2000 and is approaching the next resistance level.

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.

Source: Cryptocurrency

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