Over the past two months, open interest in bitcoin options has increased 60% to $ 13.5 billion as the price of BTC reached a whole new level. The sharp rise in bitcoin prices and higher open interest resulted in options being traded on March 26 with an expected expiration of $ 6.1 billion.
Most exchanges offer monthly risks, although some also offer weekly options for short-term contracts. On January 29, 2020, the largest expiration date for option contracts was recorded at $ 3.5 billion. At that time, this figure was 36% of all open positions.
The data above shows that Bitcoin expires on March 26 at 100,400 BTC. This unusual focus results in 45% of contracts expiring in eleven days.
It is worth noting that not all options will trade after the expiration, because some of these strikes now seem irrational, especially with less than two weeks left.
Unlike futures contracts, options are divided into two parts. Call (Buy) options allow the buyer to receive BTC at a fixed price on the expiration date. They are usually used in neutral arbitrage or bullish strategies.
Meanwhile, put (put) options are usually used as a hedge or protection against negative price fluctuations.
The relationship between purchase and purchase is uneven.
To understand how these competing forces are balanced, one must compare the call and indicate the volume of options at each expiration price. Option markets operate on an all-or-nothing basis, which means that they either have value or become useless if they are traded above the redemption price of a call, or vice versa for option holders.
By excluding the neutral to bearish sell options below $ 47,000 and the call options above $ 66,000, it is easier to assess the potential effect of Friday’s expiration. Incentives to increase or decrease prices by more than 17% are less likely because potential gains rarely exceed costs.
This data provides $ 1.13 billion for connectivity options from $ 32,000 to $ 64,000 for all options that expire on March 26. Meanwhile, lower-priced calls fell from $ 47,000 to $ 462 million. Therefore, there is an imbalance of $ 668 million which contributes to higher buying options.
The expiration date of March 26 will be well below $ 6.1 billion.
While the expiration of $ 6.1 billion stock options can be alarming, about 43% of them are effectively considered worthless. In terms of remaining open interest, the bulls control the market mainly because the recent rise in prices to a full-time high wiped out 84% of the bearish options.
As the expiration approaches, more and more put options will lose value if the BTC stays above $ 52,000, giving the benefits of neutral long options to bullish options.