The volatility of the cryptocurrency market may intensify. According to Deribit data, a total of over $15 billion worth of BTC and ETH options open interest (OI) contracts will expire this Friday (29th), making it one of the largest expiration amounts in Deribit’s history.
Bitcoin has been oscillating around $70,000 since rebounding from $63,000 on the 23rd, with a small increase of 1.8% in the past 24 hours. The price of Ether has followed a similar trend to Bitcoin, oscillating between $3,400 and $3,600 in recent times, with a small increase of 1.25% in the past 24 hours.
Over $15 billion worth of options are set to expire tomorrow
However, volatility may soon intensify. According to data from options exchange Deribit, a total of over $15 billion worth of options open interest contracts will expire this Friday (29th), making it one of the largest expiration amounts in Deribit’s history.
Specifically, the expiring options include:
BTC options:
$9.5 billion
(40% of its total OI). Based on the current market price, it is expected that $3.9 billion will expire in-the-money, with a maximum pain price of $51,000.
ETH options:
$5.7 billion
(43% of its total OI). Based on the current market price, it is expected that $2.6 billion will expire in-the-money, with a maximum pain price of $2,600.
In-the-money refers to the profit that options holders can make upon expiration. For call options, it refers to when the market price of the underlying asset is above the strike price. The “maximum pain price” of an option refers to the price that would result in the maximum overall loss for the buyer (and maximum overall profit for the seller) upon expiration.
A large number of in-the-money options expiring may drive up BTC & ETH
Deribit states that a large number of in-the-money options expiring may potentially boost the market price and volatility of the underlying assets and eliminate lower maximum pain attraction (magnetic effect).
When a large number of options are about to expire and are in-the-money, option sellers (often institutions or professional traders) may engage in market operations to adjust their risk in order to avoid significant losses. This includes buying or selling the underlying assets to hedge their options positions. Considering that the open interest for call options is higher than put options, there may be a large number of buy orders pushing up the price.
Eliminating lower maximum pain attraction refers to the fact that since the maximum pain price represents the price at which sellers have the maximum overall profit, large institutions selling options have a strong incentive to push the token price towards the maximum pain price on the option’s expiration date. However, if the market price has already deviated significantly from the maximum pain price (BTC differing by nearly $20,000), the “magnetic effect” towards that maximum pain price will weaken, reducing the market’s tendency to pull the price back to the maximum pain price.
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