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 21,818 BTC contracts and 297,049 ETH contracts is $1.36 billion and $892 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.
Calls still outweigh puts
According to Deribit, the ratio of put and call options on BTC remains at 0.63. This means traders are still selling more calls, or long contracts, than 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 around $65 thousand.
Ethereum put/call ratio amounts to 0.42, and the maximum pain point is at $3,150.
Trading platform analysts Greeks.Live note important changes in the structure of the options market.
What will happen to the price of BTC and ETH during expiration?
Today, BTC briefly fell below $60 thousand, triggering multi-million dollar liquidation. However, a few hours later, the asset was able to regain its position – at the time of writing, it is trading at $62,600. Ethereum showed similar dynamics, immediately falling below $3,000.
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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