Big Options Expiry This Friday

One of the largest crypto derivatives exchanges, Deribit, has a boatload of $BTC and $ETH options set to expire Friday. 📆

This colossal expiry includes 1.217 million BTC and ETH options contracts. These derivatives could either be a goldmine or a complete bust, depending on the trading trajectory of the top two cryptocurrencies by the week’s end. 

Luuk Strijers, the Chief Commercial Officer at Deribit, shared some insights, stating, “This September, $3 billion in BTC options and $1.8 billion in ETH options will expire, with the Max Pain level close to current price levels.” For the uninitiated, Max Pain is the point where options buyers are likely to incur the most losses at expiration.

Adding to the tension, according to data from onchain analytics firm Glassnode reports that the current options open interest is hovering around a staggering $10 billion.

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Moreover, the Options Open Interest Put/Call Ratio across all exchanges is currently at 0.46948574, adding another layer of intrigue to the market dynamics.

Click to enlarge.

Why is this important? Well, let’s dive into some of the metrics. 🤽‍♂️

The Options Open Interest Put/Call Ratio is a metric used by traders to gauge market sentiment. It is calculated by dividing the open interest of put options by the open interest of call options. Here’s a quick breakdown of how to interpret the ratio:

  • Put Option: Gives the holder the right to sell an asset at a specified price.
  • Call Option: Grants the holder the right to buy an asset at a specified price.
  • Open Interest: Represents the total number of outstanding option contracts in the market.

Interpretation of the Put/Call Ratio:

  • Ratio < 1: Indicates more open call options than put options, suggesting that most traders anticipate the underlying asset’s price to rise. This is typically seen as a bullish market sentiment.
  • Ratio = 1: Implies that the number of open call options is equal to the number of open put options. This neutral scenario indicates a balance between bullish and bearish market sentiments.
  • Ratio > 1: Signifies more open put options than call options, implying that most traders expect the underlying asset’s price to decrease. This is usually interpreted as a bearish market sentiment.

A Put/Call Ratio of 0.46948574 suggests a predominantly bullish sentiment in the market, with more traders opting for call options in anticipation of a rise in the price of the underlying assets. This could imply a general optimism about the future price movements of the related cryptocurrencies. 📉

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