Markets
Bitcoin and Ether Options Worth $10 Billion Set to Expire on Friday
It is again that time when discussions about activity in crypto derivatives take precedence.
On Friday at 08:00 UTC, bitcoin (BTC) options worth $6.68 billion and ether (ETH) $3.5 billion worth of options are set to expire on major crypto derivatives exchange Deribit.
The imminent expiration, that represents more than 40% of the current accumulated open interest of more than US$23 billion, could trigger an increase in market volatility. Large quarterly expiries often lead to increased volatility, making prices more unpredictable due to higher trading volumes and closing/rollover of positions.
“As we approach Friday’s big quarterly expiration, potentially influenced by ‘quadruple witchcraft‘ and related volatility in U.S. equity markets, more than 25% of Deribit’s open interest is expected to expire in-the-money, which equates to more than $2.7 billion. The total notional expiry size is over $10 billion,” Luuk Strijers, CEO of Deribit, told Coindesk in an interview.
Options are derivative contracts that give the holder the right but not the obligation to buy or sell the underlying asset at a predetermined price on or before a specific date. A call gives the right to buy, while a put gives the right to sell. On Deribit, an options contract represents one BTC or ETH.
Having more than 25% open interest at the money’s expiration date means that a significant number of derivatives contracts are expected to be profitable to their holders at expiration.
Bitcoin, the leading cryptocurrency by market value, has fallen nearly 9% this month, testing bargain hunters below $60,000 at one point. As usual, the selloff weighed on the broader market, pulling Ether down nearly 10%.
“The recent price drop was caused by miner sales, some pressure from the BTC seized by the Germans, and of course the imminent Mt. Gox coin transfer expected in early July,” Strijers said.
Still, the skew in call options shows that investors are willing to pay a higher premium for short- and long-term call options that offer asymmetric upside than put options, according to data tracked by Amberdata.
“While short-term bearish sentiment is evident, traders anticipate a positive move for bitcoin by July 12 and for ETH by July 5, noting the options skew. Trading in the ETH ETF is expected to begin in the first week of July,” Strijers noted.