Data shows Bitcoin traders’ neutral view ahead of Friday’s $750M BTC options expiry

January 13, 2022 Coin Telegraph

BTC Options

Derivatives data suggests that sentiment-wise, pro traders are still neutral on Bitcoin’s price prospects ahead of Friday’s $750 million options expiry.

Bitcoin (BTC) has bounced 11% from the $39,650 low made on Jan.10 and currently the price is battling with the $44,000 level. There are multiple explanations for the recent weakness, but none of them seem sufficient enough to justify the 42% correction that took place since the Nov. 10 all-time high at $69,000.

At the time (Nov. 12), negative remarks from the U.S. Securities and Exchange Commission (SEC) were issued at the rejection of VanEck's physical Bitcoin exchange-traded fund (ETF). The regulator cited the inability to avoid market manipulation due to unregulated exchanges and heavy trading volume based on Tether's (USDT) stablecoin.

Then, on Dec. 17, the U.S. Financial Stability Oversight Council recommended that state and federal regulators review regulations and the tools that could be applied to digital assets. On Jan. 5, BTC price corrected again after the Federal Reserve's December FOMC session, which confirmed plans to ease debt buyback and likely increase interest rates.

Regarding derivatives markets, if Bitcoin price trades below $42,000 by the Jan. 14 expiry, bears will have a $75 million net profit on their BTC options.

*Bitcoin options aggregate open interest for Jan. 14. Source: Coinglass*

At first sight, the $455 million call (buy) options are overshadowing the $295 million puts, but the 1.56 call-to-put ratio is deceptive because the 14% price drop over the last three weeks will likely wipe out most of the bullish bets.

If Bitcoin's price remains below $44,000 at 8:00 am UTC on Jan. 14, only $44 million worth of those call (buy) options will be available at the expiry. There is no value in the right to buy Bitcoin at $44,000 if BTC is trading below that price.

Bears might bag a $75 million profit if BTC is below $42,000

Here are the four most likely scenarios for the $750 million options expiry on Jan. 14. The imbalance favoring each side represents the theoretical profit. In practice, depending on the expiry price, the quantity of call (buy) and put (sell) contracts becoming active varies:

Between $40,000 and $43,000: 480 calls vs. 2,220 puts. The net result is $75 million favoring the put (bear) options.
Between $43,000 and $44,000: 1,390 calls vs. 1,130 puts. The net result is balanced between call and put options.
Between $44,000 and $46,000: 1,760 calls vs. 660 puts. The net result is $50 million favoring the call (bull) options.
Between $46,000 and $47,000: 1,220 calls vs. 520 puts. The net result is $125 million favoring the call (bull) options.

This crude estimate considers put options being used in neutral-to-bearish bets and call options exclusively in bullish trades. However, this oversimplification disregards more complex investment strategies.

For instance, a trader could have sold a put option, effectively gaining a positive exposure to Bitcoin (BTC) above a specific price. But, unfortunately, there's no easy way to estimate this effect.

Bulls need $46,000 for a decent win

The only way bulls can score a significant gain on the Jan. 14 expiry is by sustaining Bitcoin's price above $46,000. However, if the current short-term negative sentiment prevails, bears could easily pressure the price down 4% from the current $43,800 and profit by up to $75 million if Bitcoin price stays below $42,000.

Currently, options markets seem balanced, giving bulls and bears equal odds for Friday's expiry.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

Bitcoin price bounces to $41.5K, but derivatives data shows traders lack confidence

January 10, 2022 Coin Telegraph

Bitcoin price bounces to .5K, but derivatives data shows traders lack confidence

basis

Key BTC trading metrics are sitting on the edge of the “worst outcome” scenario, suggesting that the current sell-off is far from over.

Bitcoin (BTC) briefly reached its lowest level in five months this Monday at $39,650, marking a 42.6% drawdown from the all-time high present on Nov 22, 2022. Some argue that a “crypto winter” has already begun citing the $2.1 billion leverage-long aggregate crypto futures contracts that were liquidated over the past seven days.

*Bitcoin/USD price at FTX. Source: TradingView*

The descending channel guiding Bitcoin’s negative performance for the past 63 days indicates that traders should expect sub-$40,000 prices by February.

Confidence from investors continued to decline after the United States Federal Reserve’s December FOMC session on Jan. 5. The monetary policy authority showed commitment to decrease its balance sheet and increase interest rates in 2022.

On Jan. 5, Kazakhstan’s political turmoil added further pressure to the markets. The country’s internet was shut down amid protests and this caused Bitcoin’s network hashrate to tumble 13.4%.

Futures traders are still neutral

To analyze how bullish or bearish professional traders are, one should monitor the futures premium , which is also known as the “basis rate.”

The indicator measures the difference between longer-term futures contracts and current market levels. A 5% to 15% annualized premium is expected in healthy markets, which is a situation known as contango.

This price gap is caused by sellers demanding more money to withhold settlement longer and a red alert emerges whenever this indicator fades or turns negative, which is a scenario known as “backwardation.”

*Bitcoin 3-month future contracts basis rate. Source: Laevitas.ch*

Notice how the futures market premium did not trade below 7% over the past couple of months. This is an excellent indicator considering the absence of Bitcoin price strength during this period.

Options traders are not as bullish

To exclude externalities specific to the futures instrument, one should also analyze the options markets.

The 25% delta skew compares similar call (buy) and put (sell) options. This metric will turn positive when fear is prevalent because the protective put options premium is higher than similar risk call options.

The opposite holds when greed is the prevalent mood which causes the 25% delta skew indicator to shift to the negative area.

*Deribit Bitcoin options 25% delta skew. Source: laevitas.ch*

Readings between negative 8% and positive 8% are usually deemed neutral. The last time the 25% delta skew indicator entered the “fear” range at 10% was on Dec 6, 2022.

Thus, options markets’ traders are at the very edge of the neutral-to-bearish sentiment because the indicator currently stands at 8%. Moreover, buying protective put options is becoming more expensive, so market markers and arbitrage desks are not confident that $39,650 was the bottom.

Overall, the sentiment is pessimistic and the $2.1 billion in aggregate futures contracts liquidations signal that derivatives traders’ longs (buyers) are quickly losing confidence. Only time will tell where the exact bottom is, but presently, there is not an indication of strong support coming from pro traders.

2 key Bitcoin trading metrics suggest BTC price has bottomed

December 12, 2021 Coin Telegraph

bitfinex

Bitcoin price has yet to reclaim the $50,000 level, but the actions of options market makers and margin traders at Bitfinex suggest the most recent correction is over.

Bitcoin (BTC) has been struggling to sustain the $47,500 support since the Dec. 4 crash, a movement that wiped out over $840 million in leveraged long futures contracts. The downside move came after the emergence of the Omicron variant of the Coronavirus and recent data showing U.S. inflation hitting a 40-year high.

While newcomers might have been scared by the 26% price correction over the past month, whales and avid investors like MicroStrategy added to their positions. On Dec. 9, MicroStrategy announced that they had acquired 1,434 Bitcoin, which increased their stake to 122,478 BTC.

According to some analysts, the rationale behind Bitcoin’s weakness was the contagion fear that Evergrande, a leading Chinese property developer, defaulted on its US dollar debt on Dec. 9. The $1.1 Bitcoin billion options expiry on Dec. 10 also could have played an important factor because bears pocketed a $300 million profit.

Margin traders are still extremely bullish

Margin trading allows investors to leverage their positions by borrowing stablecoins and using the proceeds to buy more cryptocurrency. When those savvy traders borrow Bitcoin, they use the coins as collateral for shorts, meaning they are betting on a price decrease.

That is why some analysts monitor the total lending amounts of Bitcoin and stablecoins to gain insight into whether investors are leaning bullish or bearish. Interestingly, Bitfinex margin traders slightly reduced their longs ahead of the Dec. 4 price crash.

*Bitfinex BTC margin long/total percentage. Source: Coinglass*

Notice that the indicator held a decent 90% favoring longs, meaning stablecoin borrowing was only 10% of the Bitfinex total. Furthermore, the margin longs recovered by 94% less than 24 hours after the price crash. This suggests that even if those investors were caught by surprise, most held their positions throughout the movement.

To confirm whether this movement was specific to the instrument, one should also analyze options markets. The 25% delta skew compares similar call (buy) and put (sell) options. The indicator will turn positive when “fear” is prevalent as the protective put options premium is higher than similar risk call options.

The opposite holds when market makers are bullish, causing the 25% delta skew to shift to the negative area. Readings between negative 8% and positive 8% are usually deemed neutral.

The 25% delta skew ranged near 6% ahead of the Dec. 4 Bitcoin crash, which is considered neutral. Over the next 3 days the options market makers and whales displayed moderate fear as the indicator peaked at 10%, but currently it stands at 3%.

The Bitfinex margin long metric and the options main risk metric show few signs of stress in derivatives markets. Considering that these markets are more often used by pro traders, one can begin to believe in the narrative that Bitcoin will claim a new all-time high in early 2022.

Victory is for the taking in Friday’s $950M Bitcoin options expiry

December 2, 2021 Coin Telegraph

Victory is for the taking in Friday’s 0M Bitcoin options expiry

BTC Options

With BTC price under $57,000, bears appear to have a slight advantage in this week’s $950 million BTC options expiry.

Bitcoin (BTC) price is down this week, and naturally, bears will always find some reversal signal whenever the price shows strength, such as the 8% gain on Nov. 28. Of course, technical analysis is not an exact science, so there is a margin for interpretation and most traders look at multiple timeframes to find a narrative that suits their bias.

Currently, BTC price is in a descending channel that started on Oct. 31, and if this pattern plays out, Bitcoin could drop to $50,000 in the short term.

*Bitcoin/USD price on FTX. Source: TradingView*

Cryptocurrency markets crashed on Nov. 26 after concern over a new COVID-19 variant sparked a global market sell-off. As Bitcoin dipped below $54,000, bears saw a $215 million potential profit on Dec. 3’s options expiry, but that changed after BTC price regained the $57,000 support.

Furthermore, regulatory concerns coming from the United States continue to pressure the market. On Nov. 24, the U.S. Senate Banking Committee chair sought information from stablecoin issuers and exchanges by Dec. 3.

In early November, the President’s Working Group on Financial Markets released a report suggesting that stablecoin issuers in the United States should be subject to “appropriate federal oversight” similar to that legislated for banks.

Fueled by the potential government interference and negative short-term consequences, Bitcoin bears are likely to profit $80 million on Dec. 3 options expiry.

*Bitcoin options aggregate open interest for Dec. 3. Source: Coinglass.com*

At first sight, the $460 million call (buy) options are evenly matched with the $485 million put (sell) instruments, but the 0.96 call-to-put ratio is deceptive because the 17% price drop from $69,000 will likely wipe out most of the bullish bets.

For example, if Bitcoin’s price remains below $57,000 at 8:00 am UTC on Dec. 3, only $24 million worth of those call (buy) options will be available at the expiry. Therefore, there is no value in the right to buy Bitcoin at $60,000 if it is trading below that price.

Bears are comfortable with Bitcoin below $57,000

Listed below are the four most likely scenarios for the $950 million Dec. 3 options expiry. The imbalance favoring each side represents the theoretical profit. In other words, depending on the expiry price, the quantity of call (buy) and put (sell) contracts becoming active varies:

Between $54,000 and $56,000: 290 calls vs. 3,480 puts. The net result is $175 million favoring the put (bear) options.
Between $56,000 and $58,000: 750 calls vs. 2,160 puts. The net result is $80 million favoring the put (bear) instruments.
Between $58,000 and $60,000: 1,510 calls vs. 1,040 puts. The net result is $30 million favoring the call (bull) options.
Above $60,000: 2,760 calls vs. 860 puts. The net result is $115 million favoring the call (bull) instruments.

This crude estimate considers call options being used in bullish bets and put options exclusively in neutral-to-bearish trades. However, this oversimplification disregards more complex investment strategies.

For instance, a trader could have sold a put option, effectively gaining a positive exposure to Bitcoin (BTC) above a specific price. But, unfortunately, there’s no easy way to estimate this effect.

Bulls need $58,000 or higher to balance the scales

The only way for bulls to avoid a loss on Dec. 3’s expiry is by pushing Bitcoin’s price above $58,000, which is 2% away from the current $56,900. However, if the current short-term negative sentiment prevails, bears could exert some pressure and try to score up to $175 million in profit if Bitcoin price stays below $56,000.

Currently, options markets data slightly favor the put (sell) options, thus creating opportunities for additional FUD and surprise market crashes.

This simple Bitcoin options strategy lets traders profit while also hedging their bets

December 1, 2021 Coin Telegraph

BTC Options

Not sure which way BTC price might go? Here’s how pro traders use the Iron Condor options strategy to place carefully hedged bets.

For traders who are undecided on Bitcoin's (BTC) move, the "long condor with call options" yields optimal results with very low risk. This strategy offers protection down to $53,500, which would be a 7% downside move from the current $57,600, and returns a positive outcome up to $67,500.

Options markets provide more flexibility to develop custom strategies. Unlike futures, there are two separate instruments available. The call option gives the buyer upside price protection, while the protective put option offers the opposite.

*Bitcoin options strategy returns. Source: Deribit Position Builder*

This long condor strategy has been set for the Dec. 31 expiry and uses a slightly bullish range. The same basic structure can also be applied for other periods or price ranges, although the contract quantities might need some adjustment.

Bitcoin was trading at $57,600 when the pricing took place, but a similar result can be achieved starting from any price level. The minimum contract size depends on the derivatives exchange, but one needs to keep the suggested ratio to hold the overall strategy structure.

The first trade requires buying 0.54 contracts of the $52,000 call options to create positive exposure above this price level. Then, to limit gains above $56,000, the trader needs to sell 0.50 BTC call option contracts.

To further limit gains above $64,000, another 0.45 call option contracts should be sold. To complete the strategy, the trader needs upside protection above $70,000 by buying 0.41 call option contracts if the Bitcoin price skyrockets.

The 1.50 to 1 risk-reward ratio is moderately bullish

The strategy might sound complicated to execute, but the margin required is only 0.0152 BTC, which is also the max loss. Traders should remember that it is also possible to close the position ahead of the Dec. 31 expiry if there's enough liquidity.

The max net gain occurs between $56,000 and $64,000 at 0.0233 BTC, which is 50% higher than the potential loss. With 30 days until the expiry date, this strategy gives the holder peace of mind because unlike futures trading, there is no liquidation risk.

Furthermore, having a profit range that varies from a 7% downside move to a positive 17% price change seems conservative and covers a decent $14,000 price range.

Bitcoin drops below $54K, stocks sell-off after new COVID-19 variant emerges

November 26, 2021 Coin Telegraph

Bitcoin drops below K, stocks sell-off after new COVID-19 variant emerges

basis rate

Bears took control of BTC price after options markets flashed bearish signals, but should traders be worried?

Crypto exchange Deribit is the absolute leader in the Bitcoin (BTC) options markets, and on Nov. 24, the 25% delta skew indicator signaled that sentiment among pro traders was becoming “more bearish overall.”

We've seen 25-Delta put skew moved from around 0% to almost 10-15% pending time to expiry since beginning of Nov implying a more bearish overall sentiment.
Premiums for downward protection are getting more expensive.
In the short term, this expiry has a Max pain of $58k. https://t.co/jhpT1riX3g
— Deribit (@DeribitExchange) November 24, 2021

Bitcoin price appears to following a descending channel since Nov. 9, so a “bearish” signal might be a reflection of the 22% drop since the $69,000 all-time high.

Bitcoin/USD price on Bitstamp. Source: TradingView

The 25% delta skew compares call (buy) and put (sell) options side-by-side. It will turn positive when the protective put options premium is higher than similar risk call options, thus indicating bearish sentiment.

The opposite holds when market makers are leaning bullish, and this causes the 25% delta skew indicator to enter the negative range.

Bitcoin 30-day 25% delta skew. Source: laevitas.ch

Readings between negative 8% and positive 8% are usually deemed neutral, so Deribit’s analysis is correct when it states that a considerable shift towards “fear” happened on Nov. 23. However, that movement eased on Nov. 26 as the indicator now stands at 8%, no longer supporting traders’ bearish stance.

What happened in the futures markets?

To confirm whether this movement was specific to that instrument, one should also analyze futures markets.

The futures premium — also known as the “basis rate” — measures the difference between longer-term futures contracts and the current spot market levels. A 5% to 15% annualized premium is expected in healthy markets, which is a situation known as contango.

This price gap is caused by sellers demanding more money to withhold settlement longer, and a red alert emerges whenever this indicator fades or turns negative, known as “backwardation.”

Bitcoin 3-month futures basis rate. Source: laevitas.ch

Unlike the options 25% delta skew, which has shifted to “fear,” the futures’ primary risk metric was relatively stable at 11% between Nov. 16 and 25. Despite a minor drop, its current 9% is neutral for futures markets and not even close to a bearish tone.

Traders are mostly using call options

One can only make guesses on why pro traders and market makers using Bitcoin options markets are overcharging for put (sell) options. Maybe they fear imminent risk after a U.S. Senate Committee sought information on the issuance of stablecoins on Nov. 23.

On that same day, the board of governors of the Federal Reserve System announced work on a series of “policy sprints” aimed at addressing regulatory clarity in the crypto industry. The administrative agencies will potentially adjust compliance and enforcement standards on existing laws and regulations.

Still, that does not explain why these uncertainties were not reflected on Bitcoin futures markets. So one must question whether the 25% skew indicator should be disregarded in that case.

*Bitcoin Dec. 31 options open interest. Source: Coinglass.com*

The Dec. 31 Bitcoin options expiry holds 60% of the current open interest, totaling a $13.4 billion aggregate exposure. As the above chart shows, there’s virtually no interest on put (sell) options above $60,000.

Considering call (buy) options are 145% larger than the protective puts for Dec. 31, one should not worry too much on how market makers are pricing these instruments. Thus, the 25% delta skew shouldn’t hold much importance right now despite Deribit’s bearish alert.

Bitcoin price descending channel and loss of momentum could turn $60K to resistance

October 31, 2021 Coin Telegraph

Bitcoin price descending channel and loss of momentum could turn K to resistance

bitcoin futures

After a slight hiccup in BTC futures premium, traders seem comfortable despite the $58,000 support retest and the risk of $60,000 turning to resistance.

Bitcoin (BTC) appears to lack the strength to retest the $67,000 all-time high that it reached on Oct. 20 and this is causing investors to question whether or not the bullish moment has faded. Even with the price facing these hurdles, it’s still premature to call the $58,000 support level test the beginning of a descending channel.

*Bitcoin price in USD at Coinbase. Source: TradingView*

Among the factors limiting the rally is the regulatory uncertainty in the United States. Anne Termine, a partner in the government enforcement and investigations practice at Bracewell LLP and former chief trial attorney at the Commodities Futures Trading Commission (CFTC), said that “there are no easy answers” for the agency to provide clear rules.

Increasing adoption, on the other hand, has been pressuring traditional banks to seek cryptocurrency product offerings. For example, major Russian private bank Tinkoff, owner of a large online brokerage services, is researching crypto-related investment services even though the Bank of Russia withholding such launches.

This week Coinbase exchange hit the top spot as the most downloaded app for the United Stated Apple Store, which is mind-blowing. Coinbase beat tech giants like TikTok, YouTube and Instagram and this is not a small feat. Coinbase first listed on the app store in 2014 and was the most popular download in the U.S. in 2017 and May 2021.

Pro traders stumbled but are bullish again

To determine how bullish or bearish professional traders are, one should monitor the futures premium — also known as the “basis rate.”

The indicator measures the difference between longer-term futures contracts and the current price at spot market exchanges. A 5% to 15% annualized premium is expected in healthy markets, otherwise known as contango.

This price gap is caused by participants demanding more money to withhold settlement longer, and a red alert emerges whenever this indicator fades or turns negative, known as “backwardation.”

Notice how the sharp decrease caused by the $58,000 resistance test on Oct. 27 caused the annualized futures premium to reach its lowest level in three weeks. Still, the indicator recovered nicely to the current 17%, signaling a moderate bullishness.

To confirm whether this movement was specific to that instrument, one should also analyze options markets.

The 25% delta skew compares similar call (buy) and put (sell) options and will turn positive when “fear” is prevalent. That situation reflects the protective put options costing higher than similar risk call options.

The opposite movement holds when market makers are bullish, causing the 25% delta skew indicator to shift to the negative area. Readings between negative 8% and positive 8% are usually deemed neutral.

The 25% delta skew has been ranging in the neutral zone since Sep. 30. The latest bottom on Oct. 25 was negative 6%, not enough to be considered moderate bullishness. However, not even Bitcoin’s 12.5% correction from $66,600 on Oct. 21 to $58,200 on Oct. 28 was enough to inflict fear on professional traders.

Although no bearish signs emerged from the Bitcoin derivatives market, bulls should worry about the potential descending channel starting on Oct. 19. If that movement gets further confirmation, traders should expect $60,000 to become a resistance by Nov. 12.

There are no stress signs currently from professional traders, so a correction after a 63% rally in three weeks that led to the $67,000 all-time high on Oct. 20 should not be problematic.

Binance CEO expects ‘very high volatility’ in crypto. Here’s how to trade it

October 25, 2021 Coin Telegraph

Binance

Here’s how options traders would play the “very high volatility” that Binance founder Changpeng Zhao suggested will impact the crypto market over “the next few months”.

Volatility is a complex statistical measure commonly used by traders and investors. Those unfamiliar with it will likely attribute some sort of special ‘standing’ to analysts whenever the term is used. However, as shown in a recent comment by Binance exchange founder, Changpeng Zhao, most of the time people are clueless about what volatility means.

Expect very high volatility in #crypto over the next few months.
— CZ Binance (@cz_binance) October 21, 2021

This is not the first time that CZ has made an incorrect assumption on that topic. In May, CZ said that volatility was "not unique to crypto," although multiple sources, including Cointelegraph, showed that excluding Tesla, no S&P 500 stock matched Bitcoin's (BTC) 70% yearly volatility.

So what is volatility?

Realized (or historical) volatility measures how large daily price fluctuations are and higher volatility indicates that the price can drastically change over time in either direction.

This indicator might sound counterintuitive, but lower volatility periods represent a more significant risk of explosive moves. That is partially due to realized volatility being a backward-looking indicator. During quieter periods, traders tend to over-leverage, which then causes larger liquidations during sudden price moves.

*Bitcoin 50-day realized volatility. Source: TradingView*

The above data displays a 74% average 50-day volatility over the past two years. Historically, the indicator tends to accelerate as it moves above 80% but there is no guarantee that such a move will occur. Data from February and April 2017 present a counter-argument for this thesis.

Volatility does not differentiate bull and bear markets because it exclusively gauges absolute daily oscillations. Furthermore, by itself, a quiet volatility period is not an indicator of an upcoming dump.

What if CZ knows something we don't?

Considering how well-connected the world's largest crypto exchange founder is, there's always a possibility that CZ might have some inside information but if a person was so sure about an upcoming event, the odds are they would likely know whether the impact is positive or negative. Once again, expecting "high volatility" for the "next couple of months" does not indicate someone has confidence in any direction.

Let's assume that he was correct, and crypto volatility is about to breach the 100% yearly level. There’s an options strategy that fits this scenario and allows investors to profit from a strong move in either direction.

The reverse (short) iron butterfly is a limited risk, limited profit options trading strategy. It's important to remember that options have a set expiry date; therefore, the price increase must happen during the defined period.

*Profit / Loss estimate. Source: Deribit Position Builder*

The prices above were taken on Oct. 25, with Bitcoin trading near $63,000. All options listed are for the Dec. 31 expiry, but this strategy can also be used using a different time frame.

The suggested bullish strategy consists of selling 1.23 BTC contracts of the $52,000 put options while simultaneously selling 0.92 call options with an $80,000 strike. To finalize the trade, one should buy 1.15 contracts of $64,000 call options and another 1.0 contracts of the $64,000 put options.

While this call option gives the buyer the right to acquire an asset, the contract seller gets a (potential) negative exposure. To fully protect from market oscillations, one needs to deposit 0.174 BTC (roughly $11,000), representing the investors' maximum loss.

The risk to reward is sketchy, so the trader needs conviction

For this investor to profit, one needs Bitcoin price to be below $54,400 on Dec. 31, 2021 (down 14%) or above $75,500 (up 19%). The theoretical risk-reward is not good because the maximum payout is 0.056 BTC and the potential loss is over 3 times that amount.

Nevertheless, if a trader is certain that volatility is right around the corner, a 20% move from $63,000 in 66 days seems feasible. Traders should note that the investor can revert the operation ahead of the options expiry, preferably right after a strong Bitcoin price move. All one needs to do is buy back the 2 options that have been sold, and sell the other 2 that were previously bought.

Bitcoin bulls target prices above $58K ahead of Friday’s $820M options expiry

October 13, 2021 Coin Telegraph

Bitcoin bulls target prices above K ahead of Friday’s 0M options expiry

BTC Options

$820 million in BTC options expire on Oct. 15, and data signals that bulls are set to celebrate another positive week.

Everyone is talking about a six-figure Bitcoin (BTC) price now that the digital asset has broken out of its multi-month downtrend and confirmed that a bullish trend is in play.

If Bitcoin happens to enter a parabolic move toward $110,000, that would finally match PlanB’s Stock-to-Flow model prediction. According to the pseudonymous analyst , the scarcity and valuation of gold and other precious metals and “Elon Musk’s energy FUD and China’s mining crackdown” are a few of the factors responsible for the past five months of 50% or higher inaccuracy in the model.

Bulls’ hopes mostly cling to an exchange-traded fund being approved by the United States Securities and Exchange Commission. Currently, there are multiple requests pending review between Oct. 18 and Nov. 1, but the regulator could postpone its final decision.

Oct. 15’s $830 million options expiry was largely impacted by the 20% price rally initiated on Oct. 4, which most likely eliminated 92% of the put (sell) options.

*Bitcoin price on Coinbase in USD. Source: TradingView*

The aftermath of China’s mining crackdown was an important event that might have fueled investor sentiment, and research shows the U.S. accounting for 35.4% of the Bitcoin hash rate.

Furthermore, as Cointelegraph reported, the U.S. states of Texas and Ohio are also expected to receive additional large-scale Bitcoin mining centers, which will effectively boost the U.S. crypto market share even higher.

The Oct. 8 expiry was profitable for bulls

Following last week’s $370 million estimated net profit from the BTC options expiry, bulls had more firepower, and this is evident in this Friday’s $820 million expiry. This advantage explains why the call (buy) options open interest is 43% larger than the neutral-to-bearish put options.

*Bitcoin options aggregate open interest for Oct. 15. Source: Bybt*

As the above data shows, bears placed $335 million in bets for Friday’s expiry, but it appears that they were caught by surprise, as 92% of the put (sell) options are likely to become worthless.

In other words, if Bitcoin remains above $56,000 on Oct. 15, only $36 million worth of neutral-to-bearish put options will be activated on Friday’s 8:00 am UTC expiry.

Bulls have a reason to push BTC price above $58,000

Below are the four likeliest scenarios for Oct. 15’s expiry. The imbalance favoring either side represents the theoretical profit. In other words, depending on the expiry price, the quantity of call (buy) and put (sell) contracts becoming active varies:

Between $52,000 and $54,000: 3,140 calls vs. 2,110 puts. The net result is $55 million favoring the call (bull) instruments.
Between $54,000 and $56,000: 3,700 calls vs. 1,240 puts. The net result is $130 million favoring the call (bull) instruments.
Between $56,000 and $58,000: 4,850 calls vs. 680 puts. The net result is $235 million favoring the call (bull) instruments.
Above $58,000: 6,230 calls vs. 190 puts. The net result is complete dominance, with bulls profiting $350 million.

This raw estimate considers call options being exclusively used in bullish bets and put options in neutral-to-bearish trades. However, investors might have used a more complex strategy that typically involves different expiry dates.

Bears need a 7% price correction to reduce their loss

In every scenario, bulls have absolute control of this Friday’s expiry, and there are a handful of reasons for them to keep the price above $56,000. On the other hand, bears need a 7% negative move below $54,000 to avoid a loss of $235 million or higher.

Nevertheless, traders must consider that during bull runs, the amount of effort a seller needs to pressure the price is immense and usually ineffective. Analytics point to a considerable advantage from call (buy) options, fueling even more bullish bets next week.

Matrixport Launches ‘BTC-U Range Sniper’ — Returns Up to 200% for Accurate Predictions

September 7, 2021 Bitcoin.com

BTC Options

Bears might bag a $75 million profit if BTC is below $42,000

Bulls need $46,000 for a decent win

Futures traders are still neutral

Options traders are not as bullish

Margin traders are still extremely bullish

Bears are comfortable with Bitcoin below $57,000

Bulls need $58,000 or higher to balance the scales

The 1.50 to 1 risk-reward ratio is moderately bullish

What happened in the futures markets?

Traders are mostly using call options

Pro traders stumbled but are bullish again

So what is volatility?

What if CZ knows something we don't?

The risk to reward is sketchy, so the trader needs conviction

The Oct. 8 expiry was profitable for bulls

Bulls have a reason to push BTC price above $58,000

Bears need a 7% price correction to reduce their loss

Share this video