A total of 62,000 Bitcoin (BTC) options expire this Friday, equating to an open interest of $ 830 million. These large numbers do not reflect the fact that 58% of these options are no longer worth anything.
As we near the expiration date Calling options above the current level start to decrease very quickly. It’s not worth paying $ 20 for the opportunity to buy bitcoin for $ 14,500 on Friday morning. Therefore, extending the options for the next month is not very useful.
With less than 48 hours to go until the October due date Call options of $ 14,500 or more are unlikely. The same applies to the put options of USD 11,500, which are currently trading below USD 10 each.
Deribit is a leader in the options market with a 70% share of options that still have value. Currently there Call options of USD 134 million from USD 11,500 to USD 13,500, cumulative against USD 45.5 million in put options from USD 12,500 to USD 14,500. Therefore, bulls prefer bears in a 3 to 1 ratio.
Chicago Mercantile Exchange (CME) has a 26% market share among BTC options for the month of October that still have value. Call options near the current market level amount to USD 72 million, while put options are less than USD 1 million. This movement does not differ from the maturities observed in the past. As CME options traders, they are usually extremely optimistic.
So, There is currently a $ 160 million imbalance in favor of bulls in the Bitcoin options markets. This is a relevant number considering the expiration occurs at a set time. OKEx and Deribit futures and options expire at 8:00 a.m. (UTC) on October 30th and the CME a few hours later at 4:00 p.m. (UTC).
The open interest in futures generally falls close to maturity
Many traders believe the $ 5.4 billion open interest in Bitcoin futures will also expire on Friday. Most of these contracts are for an unlimited period (reverse swaps) or are set for a later date.
On this occasion, CME leads the way with an outstanding interest of USD 360 million for the month of October, but there is one detail. This face value will be drastically reduced before it expires as traders move their positions for the next few months. As evidence of this move, CME’s remaining open interest was reduced by $ 130 million yesterday in October.
Regardless of how much an investor’s profit or loss is, it is possible to extend the position for the next expiry. Unlike the options markets, futures contracts are not written down near their last trading day.
The futures margin is adjusted daily. This means that the seller (short) pays the buyer (long) of the contract when Bitcoin trades above price, and the opposite happens when BTC’s price closes below it. Both parties can benefit from a renewal of their positions, provided there is enough leeway to maintain them.
For professional traders, The futures premium is the most useful indicator for measuring how bullish or bearish these investors are. As of this writing, OKEx tops the remaining exchanges with $ 69 million due Friday, followed by Huobi’s $ 23 million.
This indicator is known as the base and is typically between 5% and 15% on an annual basis. As long as the premium is positive, the market is characterized by contango. While values below 5% indicate a slight downward trend.
A negative futures premium is very unusual and is generally related to liquidity problems.
As we can see in the previous graphic, Investors were very bullish in August as the 1-month futures contract traded at a premium of 25% or more. This was caused by a 30% increase in Bitcoin price from $ 9,100 to $ 11,900.
The basic indicator is currently around 14%, on the edge of a very bullish zone. Remember, any bullish leveraged position opened in the past six months is currently winning.
Meanwhile, open interest in Bitcoin futures has more than doubled from $ 2.6 billion in April to $ 5.4 billion. Hence, it is safe to conclude that investors are well prepared to defend the current support level of $ 13,000.
Both derivative contracts support the current strength of the market. Aside from the $ 160 million imbalance due to the expiration of the option, futures buyers are comfortable.
Since Bitcoin rose above $ 11,300 twelve days ago, short-term sellers have injured themselves and watched their balances drop every day.
As for Friday’s expiration As usual, some additional volatility is expected, but from what we can see from the futures premium, it is unlikely that the bears will have a chance to regain control of the markets.
The views and opinions expressed here are solely those of darer and do not necessarily reflect the views of Cointelegraph. Every investment and business move is associated with risks. You must do your own research when making a decision.