Approximately $1.79 billion in Bitcoin (BTC) and Ethereum (ETH) options are set to expire today, leading to anticipated market volatility.
Traders are closely watching this event, especially with the upcoming launch of spot Ethereum exchange-traded funds (ETFs).
Traders Anticipate Volatility Surge with Options Expiry and Ethereum ETF Buzz
According to Deribit’s data, 20,679 Bitcoin contracts, worth approximately $1.31 billion, are set to expire today. This tranche is slightly lower than last week’s figures, which were 23,832 contracts. These expiring contracts have a put-to-call ratio of 1.19, with a maximum pain point of $62,000.
Read more: An Introduction to Crypto Options Trading
The maximum pain point in the crypto options market represents the price level that inflicts the most financial discomfort on option holders. Meanwhile, the put-to-call ratio suggests a prevalence of purchase options (calls) over sales options (puts).
In addition to Bitcoin options, 142,583 Ethereum contracts will expire today, holding a notional value of over $483.84 million. The put-to-call ratio is 0.37, with a maximum pain point of $3,150.
Deribit’s analysts offered insight into the options market this week. They noted that Kraken’s note to Mt Gox creditors repayment appeared to cause one fund to shift their December 85,000 Calls to an August 65,000 straddle to play gamma in either direction.
Gamma in crypto options trading refers to the rate of change in an option’s delta in proportion to a $1.00 price movement in the underlying asset. It represents the extent of price exposure risk in an option position.
“Spot after first selling off to 63,000, powered up and forced short-covering of Calls, Delta, and [implied volatility] IV. Can’t be coincidence that $4.5 million was released from a sale of Dec 85,000 calls, and that exact amount ploughed into the Aug 65,000 straddle,” they wrote.
They also pointed out similar transactions, including the purchase of August 70,000 calls funded by December 90,000 calls.
“This inflow of premium was a combination of underperformance [fear of missing out] FOMO, short covering, and fresh exposure after the Germain government coins ran out and the market soared way past many expectations above $66,000,” Deribit added.
Furthermore, Deribit outlined that the indication of spot Ethereum ETF trading on July 23 has stimulated a strong rally for ETH. However, the spread between BTC and ETH narrowed from 15% to 8%.
Market analysts have noticed a trend since last week. A joint report by BlockScholes and Bybit noted that starting last week, the anticipation of these ETFs might have influenced the behavior of ETH derivatives, making it different from that of BTC. Additionally, BlockScholes’s Senti-Meter Index, which measures investors’ risk preferences based on fund rates, yields, and volatility, indicates that investors have a more positive outlook on ETH compared to BTC.
Read more: 9 Best Crypto Options Trading Platforms
Historically, options expiration tends to cause temporary sharp price movements. The market will usually stabilize soon after. However, traders should remain careful in analyzing technical indicators and market sentiment to effectively navigate the potential volatility.
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