The expiration of $ 540 million in Ethereum options this Friday will favor traders with targets of $ 5,000

The Ether (ETH) bulls are likely very pleased with the 368% gains made so far in 2021 and it seems that there is currently no day that the altcoin does not hit a new all-time high.

Even as Ether heads towards $ 5,000, there are still many concerns about the network’s ability to absorb strong demand from the decentralized finance (DeFi) and non-fungible tokens (NFT) sectors.

Another potential setback is the U.S. Treasury Department’s November 1st report on the regulation of stablecoins. The document highlights the need for Congress “to ensure adequate federal prudential oversight in a consistent and comprehensive manner.”

The expiration of $ 540 million in Ethereum options this Friday will favor traders with targets of $ 5,000
The expiration of $ 540 million in Ethereum options this Friday will favor traders with targets of $ 5,000

Additionally, competing networks that provide interoperability with large DeFi projects have gained acceptance in both total value (TVL) and market share in smart contracts. For example, Solana (SOL) hit a new high of $ 236 this week, outperforming Cardano (ADA) and becoming the fourth cryptocurrency by market cap.

According to data from CryptoSlam, Solana secondary sales in NFT markets hit $ 495 million in the past three months, but the Ethereum blockchain remains the most popular, with NFT secondary sales exceeding $ 495 million last month 1 $ 76 billion.

Ether price in USD (Coinbase). Source: TradingView

By managing to stay one step ahead of the competition and creating a way to solve the scalability problem by migrating to a proof-of-stake network, Ethereum has attracted some large investors. They include the owner of the Dallas Mavericks, Mark Cuban, the Houston Fire Department Pension Fund, and billionaire Barry Sternlicht.

The November 5th expiration date of the ether options at $ 540 million may seem like an undeniable win for the bulls, but it wasn’t the case a few weeks ago.

Added open interest in Ether options for November 5th. Source: Bybt

At a Glance 300B Put Options Dominate Still, the 0.80 call / put ratio is misleading as the recent rally is likely to undo most bearish bets.

For example, if the price of Ether is above $ 4,500 at 8:00 a.m. UTC on November 5th, only $ 1.5 million of those put options will expire. The right to sell ether for $ 4,500 has no value if it trades above that price.

Cops are fine over $ 4,500

Below are the four most likely scenarios for the $ 540 million due on November 5th. The imbalance favored by each side represents the theoretical profit. This means that the number of activated buy (call) and sell (put) contracts varies depending on the expiry price:

  • Between $ 4,300 and $ 4,400: 6,870 call options versus 6,000 put options. The net result is balanced between bulls and bears.
  • Between $ 4,400 and $ 4,600: 13,750 call options versus 350 put options. The net result is USD 60 million in favor of purchase instruments (bullish).
  • Between $ 4,600 and $ 4,700: 18,500 call options versus 50 put options. The net result is USD 85 million in favor of purchase instruments (bullish).
  • Over $ 4,700: only 22,800 call options, no put. The net result is total dominance, with the cops raking in $ 107 million in profit.

This gross estimate takes into account that call options are only used in bullish bets and put options in neutral to bearish trades. However, this simplification does not take into account more complex investment strategies.

For example, a trader could have sold a put option, effectively taking positive exposure to Ethereum above a certain price. But unfortunately there is no easy way to gauge this effect.

Bears need a 6% price correction to reduce their losses

The only way for bears to avoid losses on Friday’s expiration date is to lower the price of Ether on the 5th So unless there is worrying news or events announced before the weekly options expire, the bulls are likely to gain US $ 85 million – Achieve dollars or more.

Traders also need to keep in mind that a seller’s effort to get the price hit during bull runs is immense and usually ineffective. Currently, data from the options markets suggests a significant lead in call options, fueling bullish bets for Ether and raising expectations for a rally to $ 5,000.

The views and opinions expressed here are solely those of author and do not necessarily reflect the views of Any investment or commercial move involves risk. When making a decision, you should do your own research.

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