$3.6 Billion Worth of Bitcoin Options Will Expire Today

Annie Li  Apr 30, 2021 18:05  UTC 10:05

3 Min Read

Today, $3.6 billion Bitcoin options will expire. This provides speculators with the last opportunity to buy or sell Bitcoin at a predetermined price.

Bitcoin options provide traders with a unique opportunity to buy or sell BTC at a set price. The price of an option contract will vary depending on the time of purchase, the strike price, and the day of expiry. An option's exercise price is the price the underlying asset can either be bought or sold for. 

Source: Deribit

The figure above shows the distribution of Bitcoin (BTC) options that will expire on April 30. According to data from crypto derivatives exchange Deribit, the current "maximum pain price" that Bitcoin will expire at is $54,000, which is very close to Bitcoin's current price. At the time of writing, BTC is trading at $54,403.

The greatest pain point is the price at which the Bitcoin options buyer loses the most in the market.

In other words, the maximum pain price will cause investors who previously purchased options to lose their time and opportunity cost of reinvestment of option premiums. This is the price that makes most options worthless because it is no different from buying or selling Bitcoin on the public trading market. However, the holders of the option still need to pay for the option premiums to guarantee their spot.

Source: BTC Option Open Interest By Strike Price on Expiration Date of April 30 via Bybt 

The strike price of most call options and put options on April 30 was around $54,000. Around this level, a total of 960.5 BTC call options 771.4 BTC put options will expire. In general, call/put ratio is 1.44, greater than 1, which proves that there are still more bullish investors.

As can be seen from the above figure, there are still many investors with a large amount of open interest at an exercise price of around $80,000, and open interest has reached 7.76K BTC.

Open interest is the number of option contracts held by investors in all markets after the end of the previous trading day.

As the current price is moving around $54K, it seems that Bitcoin is neither bullish nor bearish in the short term and Bitcoin’s consolidation may continue for a substantial period of time. 

Since the holders of the bullish contract who have accumulated Bitcoin at a high strike price will most likely not exercise the option. If they chose to execute this option, these investors will buy Bitcoin at a higher price, thereby pushing up the price.

Conversely, most of the bearish open interest is focused around $50,000 and $52,000, valued at 3.75K BTC and 4.06K BTC. There is also not a high probability that bearish speculators will be willing to sell assets at this predetermined price.

However, it is worth noting that the maximum pain price of the options contracts with an expiry date of May 7 is hovering around $56,000, higher than the current "maximum pain price" of $54,000. This proves that there are still more bullish investors that may push Bitcoin's price to $56K for next week.

Currently, the total amount of open positions for Bitcoin options are $13.54 billion, of which more than 88% are from Deribit, the world's largest crypto derivatives exchange, and the total number of expiring options contracts is estimated to be approximately 68,500 BTC.

Image source: Shutterstock

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