Bitcoin Options Worth $5.8 Billion Expire Today: Bulls Are Winning

The $5.8 Billion Options Expiry

Every last Friday of the month, a large volume of options expires on the Deribit cryptocurrency exchange. Today, they amount to $5.8 billion, and thanks to the recent strong rally, the bulls are winning. Nearly two-thirds of call options are in profit.

Understanding Cryptocurrency Options

Options are a very popular cryptocurrency derivative. When purchasing them, a trader pays an option premium and has the right (but not the obligation) to execute the contract by the expiration date.

• Call options (bullish): Speculate on the price increase of the underlying asset, in our case, Bitcoin. If the current market price rises above the strike price, such an option is referred to as ITM (In the Money). After expiration, it is advantageous for the owner to exercise this option because it represents a cheaper purchase than buying directly on the market.
• Put options: Function similarly to call options, except the trader speculates on a price decrease.

Hedging Against Unplanned Movements

Professional traders often use this derivative as a hedge against unplanned price movements (hedging).

For example, if a trader opens a short position on Bitcoin, they might buy a call option against it. In the event of a market decline, they realize a profit from the short position while simply paying the premium for the unused option. Conversely, in the case of a loss from the short position, they exercise the call option, thereby reducing their overall loss.

What Impact Will This Have on the Market?

For the reasons mentioned above, it is not possible to clearly determine how many of the given options will ultimately be exercised and how it will directly affect the market. Today, daily, weekly, and monthly options expire on the Deribit exchange.

The event will occur in just three hours (10:00 our time), and we currently see a volume of $5.8 billion in play.

• A total of 73,024 contracts will expire.
• The put-to-call ratio stands at 1.12, making it relatively balanced.
• The Max Pain Price, where the ITM value on both sides would be equalized, is $70,000.

That Max Pain Price is $10,000 less than where the Bitcoin price is currently moving.

On the chart, we can clearly see that 66.13% of call options are above their strike price, while on the put option side, we have only 0.78%.

The highest volume of call options was centered at the $75,000 price mark. If the bears wanted to put up a fight, they would need to push the price down to at least this level. This scenario is highly unlikely to happen.

Given the high rate of ITM contracts, however, some volatility should be expected. Many bullish contracts around $80,000 were sold over the last day. Just yesterday, the chart showed an expiration of $6.4 billion, and the put/call ratio was 0.83 (with 44,639 call options).

We will soon find out how it turned out, and I will analyze the entire week in detail again in my Sunday analysis. Enjoy the last weekend of August.