BTC options combine open interest. Source: Kryptorank
Most exchanges offer monthly exposure, but some also offer weekly options on short-term contracts. The 29th. In January 2020, the option contracts expire for a record $3.5 billion. This figure represented 36% of total open interest at that time.
The total open interest of BTC options at expiration. Source: Bybt
The above data shows that bitcoin fell on the 26th. March is at 100,400 BTC. This unusual concentration means that 45% of contracts expire in 11 days.
It should be noted that not all options will be traded after the deadline, as some of these offers seem unreasonable now, especially with less than two weeks to go.
Unlike futures contracts, options are divided into two segments. Call options allow the buyer to buy BTC at a fixed price on the expiration date. They are generally used for neutral arbitrage transactions or rising strategies.
Put options are generally used to hedge or protect against adverse price movements.
Unbalanced Bell Routing
To understand how these competing forces are balanced, compare the size of calls and puts at each strike price. All-or-nothing options markets, meaning they become valuable or worthless if they trade above the strike price of a call, or vice versa, for put holders.
Cumulative open interest for BTC options on the 26th. March. Source: Bybt
Excluding downside neutral puts below $47,000 and calls above $66,000 makes it easier to assess the potential impact of Friday’s expiration. Incentives for a price swing or drop of more than 17% become less likely, as potential returns rarely exceed value.
This data suggests $1.13 billion in call options for a total expiration on the 26th. Mars from $32,000 to $64,000. Meanwhile, the more bearish puts at $47,000 are at $462 million. So there is an imbalance of $668 million in favor of the more bullish call options.
The March 26 maturity date will be well below $6.1 billion.
The $6.1 billion drop may be worrisome, but nearly 43% of that is already considered worthless. As for the rest of the open interest, the bulls are largely in control, as the recent surge in prices to a new record high has wiped out 84% of bearish options.
As the expiration date approaches, more puts will lose their value if BTC remains above $52,000, increasing the advantage of neutral calls over bullish calls.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Cointelegraph. Every investment and every stage of trading involves risk. You should do your own research before making a decision.
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