Leading up to Friday, there appears to be a lack of enthusiasm for the $750M Bitcoin options expiry. The expiration has become synonymous with the introduction of more bullish and bearish conditions within crypto markets.
The “bitcoin options expiring” is a data that shows Bitcoin traders’ neutral view ahead of Friday’s $750M BTC options expiry.
The price of Bitcoin (BTC) is now dueling with the $44,000 mark after rising 11% from the $39,650 low reached on January 10. There are several reasons for the current weakening, but none of them appear enough to account for the 42 percent drop that has occurred since the all-time high of $69,000 on November 10.
When VanEck’s physical Bitcoin exchange-traded fund was rejected at the time (12 November), the U.S. Securities and Exchange Commission (SEC) released critical statements (ETF). Due to uncontrolled exchanges and high trading volume based on Tether’s (USDT) stablecoin, the regulator stated his inability to prevent market manipulation.
The U.S. Financial Stability Oversight Council then advised state and federal authorities to evaluate laws and the mechanisms that may be used to regulate digital assets on December 17. After the Federal Reserve’s December FOMC meeting, which reiterated intentions to ease debt repurchase and probably raise interest rates, the price of bitcoin again declined on January 5.
Regarding the derivatives market, bearish will win by $75 million on their BTC options if the price of Bitcoin moves below $42,000 by the Jan. 14 expiration.
the total open interest in bitcoin options on January 14. Coinglass as a source
The $455 million in call (buy) options seem to be more valuable than the $295 million in put (sell) options at first glance, but the 1.56 call-to-put ratio is misleading since the 14 percent price decline over the last three weeks will probably wipe out the majority of the bullish bets.
Only $44 million worth of such call (purchase) options will be left upon expiration if Bitcoin’s price is below $44,000 by 8:00 AM UTC on January 14. If Bitcoin is selling below $44,000, there is little benefit in having the option to purchase it at that price.
If BTC falls below $42,000, bears might make $75 million.
The four most probable outcomes for the $750 million options expiring on January 14 are shown below. The potential profit is represented by the imbalance that favors either side. In reality, the number of call (buy) and put (sell) contracts that become active fluctuates based on the expiration price:
- 480 calls vs 2,220 puts between $40,000 and $43,000. Overall, the put (bear) options are favored by $75 million.
- 1,390 calls and 1,130 puts were made between $43,000 and $44,000. Overall, call and put options are equally distributed.
- 1,760 calls vs 660 puts between $44,000 and $46,000. The final outcome favors call (bull) options by $50 million.
- 1,220 calls and 520 puts were made between $46,000 and $47,000. Overall, there is a $125 million advantage for the call (bull) options.
This rough estimate assumes that put options are only utilized in bullish trades and call options are only used in neutral to bearish bets. But this simplicity ignores more sophisticated investing techniques.
A trader may have, for instance, sold a call option to generate positive exposure to Bitcoin (BTC) above a certain price. Unfortunately, there is no simple method for estimating this impact.
A repetition of December’s “nuke” is cited by traders as a possible explanation for Bitcoin’s surge to $44,000.
Bulls must win with $46,000 to have a chance.
Bulls must keep Bitcoin’s price above $46,000 in order to make a substantial profit on the Jan. 14 expiration. On the other hand, if the present short-term negative attitude continues, bears may easily push the price down 4% from its current level of $43,800 and profit by up to $75 million if Bitcoin price remains below $42,000.
The chances for Friday’s expiration are identical for bulls and bears at this time, according to the state of the options markets.
The author’s thoughts and opinions alone, not necessarily those of Cointelegraph, are conveyed in this article. Every trading and investing decision has some risk. When selecting a choice, you should do your own study.
The “CME bitcoin futures 11 26 21 btcx1” is a data that shows Bitcoin traders’ neutral view ahead of Friday’s $750M BTC options expiry. Reference: cme bitcoin futures 11 26 21 btcx1.
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