Despite Bitcoin (BTC) showing strength during the US session, traders and investors should expect some volatility during the early hours of the European session on Friday amid the anticipation of options expiry.
However, the impact could be short-lived, given that markets quickly adjust to new trading environments shortly after.
What Traders Should Know About Today’s Options Expiry
Data on Deribit shows that over $5.03 billion in Bitcoin and Ethereum (ETH) options will expire today. For Bitcoin, the expiring options have a notional value of $4.3 billion and a total open interest of 36,970.
With a Put-to-Call ratio 1.06, the maximum pain level for today’s expiring Bitcoin options is $108,000.
For their Ethereum counterparts, the notional value for today’s expiring ETH options is $712.35 million, with total open interest of 239,926.
Like Bitcoin, today’s expiring Ethereum options have a Put-to-Call ratio above 1, with Deribit data showing 1.11 as of this writing. Meanwhile, the maximum pain level, or strike price, is $2,600.
Notably, today’s expiring Bitcoin and Ethereum options are significantly higher than last week’s. On July 4, BeInCrypto reported nearly $3.6 billion expiring options, highlighting 27,384 BTC and 237,274 ETH contracts, with notional values of $2.98 billion and $610 million, respectively.
However, the main similarity between this week’s expiring options and those seen last week is that both display Put-to-Call ratios (PCR) above 1.
A PCR greater than 1 indicates that more Put (Sales) options are traded than Call (Purchase) options, suggesting a bearish market sentiment.
Bitcoin’s PCR at 1.06 and Ethereum’s at 1.11 suggest a balanced bet among traders between sale and purchase orders. This balanced outlook comes as investors speculate whether the market will move lower or are hedging their portfolios in case of a sell-off.
High-Leverage Trading Activity – Extreme Risk Taking
Analysts at Greeks.live note a minimal consensus on market direction, with most activity centered around news events rather than price analysis. However, they also highlight high-leverage trading activity and extreme risk-taking.
“Traders discussing 500x leverage positions that appear ‘suicidal’ from current market levels. New positions being opened despite the extreme risk, described as interestarding. Discussion of 100% signal trading setups suggesting high-confidence but high-risk strategies,” Greeks.live shared in a post.
Notably, high-leverage trading at 500x amplifies both gains and losses. Meanwhile, Bitcoin and Ethereum traded well above their respective max pain levels.
As of this writing, Bitcoin had sold for $116,823 after establishing a new all-time high (ATH). Meanwhile, Ethereum had traded for $2,970 after soaring almost 7% in the last 24 hours.
The maximum pain point is a crucial metric in crypto options trading. It represents the price level at which most options contracts expire worthless. This scenario inflicts the maximum financial loss, or “pain,” on traders holding these options.
The concept is significant because it often influences market behavior. According to the Max Pain theory, the asset’s price tends to gravitate toward this level as options near expiration.
As the options near their expiry time, 8:00 UTC on Deribit, the prices of Bitcoin and Ethereum could drop towards these levels. However, this does not necessarily mean falling all the way to $108,000 for BTC and $2,600 for ETH.
Markets usually stabilize soon after traders adapt to the new price environment. With today’s high-volume expiration, traders and investors can expect a similar outcome, potentially influencing market trends into the weekend.
Disclaimer
In adherence to the Trust Project guidelines, BeInCrypto is committed to unbiased, transparent reporting. This news article aims to provide accurate, timely information. However, readers are advised to verify facts independently and consult with a professional before making any decisions based on this content. Please note that our Terms and Conditions, Privacy Policy, and Disclaimers have been updated.
