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Options for $1.35 billion will 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 20,000 BTC contracts and 200,000 ETH contracts is $1.35 billion and $710 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.

The options market is quiet

According to Greeks.live, the BTC put to call ratio remains at 0.49. This means that the number of calls, or long contracts, exceeds 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 located at $68,500, which is quite close to the current price.

The put/call ratio on Ethereum, meanwhile, is 0.36, with the maximum pain point at $3,600.

However, Greeks.live analysts note that the current calm in the market is unlikely to last long.

“There have been fewer hot spots in the market recently and the market is relatively calm. There should be news about the approval of the ETH ETF by the end of this month, so now is the time to plan ahead for call options for next month,” they comment.

What will happen to the BTC price during expiration?

Bitcoin has shown impressive volatility this week: amid the release of important macroeconomic data, the price of the main cryptocurrency dropped from $71,600 to $66,250. At the time of writing, BTC is trading at $67,030, having lost 0.5% over the past 24 hours. Ethereum, meanwhile, lost important support and fell below $3,500 despite the positive news.

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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