Potential Impact of the $2.5B Bitcoin Options Settlement on Financial Markets?
Here's a fresh take on the Bitcoin options expiry coming up on Friday, May 2:
On Friday, approximately 27,000 BTC options contracts, worth around $2.54 billion, are due to expire. This week's event is about on par with recent weeks, as derivatives crypto trading continues to proceed cautiously while spot markets show signs of recovery.
This week's batch of Bitcoin options contracts exhibits a put/call ratio of 1, meaning short and long contract sellers are pretty evenly matched. Additionally, the max pain point, or the level where most losses will likely occur on expiry, stands at $90,000.
Interestingly, open interest, or the value or number of BTC options contracts still outstanding, is at its highest at the $100,000 strike price, with roughly $1.5 billion. This bullish shift in sentiment arises from derivatives speculators placing bets on higher prices.
However, there's a fair amount of open interest at the $80,000 and $65,000 strike prices as well. This indicates that bears are retaining their short options, according to Deribit.
A market update from derivatives provider Greeks Live earlier in the week indicated that implied volatility is on the decline in the recent past, with both short- and medium-term declines especially noticeable in BTC. Analysts from Greeks Live added that the market isn't currently anticipating much volatility moving forward.
"Despite the BTC price fluctuating around $95,000, market sentiment on the cryptocurrency side of the market is not particularly high and can be summarized as improving," according to Greeks Live.
Deribit concurs, noting that derivatives markets are still relatively subdued, BTC volatility trades low and steep with short-dated smiles skewed neutral, and funding rates remain close to zero after some slight negative spikes. In simpler terms, short-term trading patterns appear neutral, and fees that traders pay to hold positions are staying close to zero.
Apart from this week's Bitcoin options contracts, roughly 175,000 Ethereum options contracts are expiring today, totalling a notional value of $317 million. The max pain point for Ethereum stands at $1,800, with a put/call ratio of 0.87.
With Friday's combined crypto options expiry notional value reaching approximately $2.85 billion, the crypto market seems to be ending the week on a positive note. As of Thursday, Bitcoin was leading the pack, reaching a high of $97,340. Other altcoins performing well include Dogecoin, Avalanche, Litecoin, and Hyperliquid. Ethereum, while displaying minor gains, remains at crypto winter lows.
Pro tip: Be prepared for potential Bitcoin price swings around the expiry date, given the historical tendency for significant price movements following large options expiries. Keep an eye on maximum pain points and monitor market sentiment closely.
- The upcoming Bitcoin options expiry on Friday, May 2, involves approximately 27,000 contracts, worth around $2.54 billion.
- This week's Bitcoin options contracts exhibit a put/call ratio of 1, indicating that short and long contract sellers are evenly matched.
- The max pain point for Bitcoin stands at $90,000, where most losses are likely to occur on expiry.
- Open interest is at its highest at the $100,000 strike price, with roughly $1.5 billion, suggesting a bullish shift in sentiment.
- There's also significant open interest at the $80,000 and $65,000 strike prices, indicating that bears are retaining their short options.
- Implied volatility is on the decline, with both short- and medium-term declines especially noticeable in BTC, according to derivatives provider Greeks Live.
- Apart from Bitcoin, roughly 175,000 Ethereum options contracts are expiring today, totalling a notional value of $317 million, with the max pain point for Ethereum at $1,800.
