Bitcoin Options over $1bn expiration does not comfort traders

Ever since the Bitcoin halving, traders have been even more hopeful for BTC’s price to rise. Many analysts noted that the impact of the halving will not be visible on the BTC market right away as miners adjusted to the new reward. With over $1 billion BTC options contract expiring on 26 June, all eyes have been on the BTC market.

According to market data provider Skew, 104.5k BTC options contract were set to expire next Friday. Ethereum Options were also noting great interest on 26 June, as 283.5k ETH options were to terminate. This has been noted as the largest expiration of crypto options contracts ever. The leading exchange for BTC options, Deribit contributed 60% of the listed open interest. It had a huge spectrum of strikes from 2.5k to 32k, with 25k Out of the Money [OTM] Puts, while 37k OTM calls, indicating that more traders may reap profits if the price of the asset rises. Similarly, CME’s range calls were between 10k and 15k, with the call spread being heavier.

According to Deribit Insights, the most unlikely range for traders over the next few weeks was <5k and >15k, which left approximately 20k OTM Puts and 50k OTM Calls. It stated:

“The 2:5 Put:Call ratio commonly denotes a bullish bias, but this measure, while often indicatively useful, should be used within context.”

Despite the higher demand for Call options, the traders were only semi-bullish. Despite the demand, not all the call spreads on CME were bought and on Deribit the BTC bought with protective Put, which increased the Put OI. Even though Put and Call ration could be difficult to read, it highlighted aggregated areas on interest.

On the other hand, data from Deribit suggested the rising <20d tail for Puts and Calls, which suggested initial interest in both options contract was net buying or some inhibition to sell. As the expiry of the contracts approaches the option deltas [hedge ratio] change rapidly, suggesting a big spot move in a thin market could be a problem by large OI strikes.

Even though the skew firmness confirmed downside fears leading to large OI, but since the price levels have been tested, it could be managed. The problem area was the upside, which has not been tested in recent times. According to Deribit:

“A sharp pump >11k into large Deribit+CME strikes could create a perfect storm of illiquidity in the underlying market.”