The expiration of the $ 161 million Ethereum option favors bulls as ETH converts the $ 2,000 level into support

With no short-term solution in sight to the network’s rising fees, some investors fear that the price of Ether (ETH) could be corrected. The proposal EIP-1559 is to be combined with the upcoming London update. This will change the gas price structure, but traders will have to deal with high rates until then.

The flexible block size suggestion suggests a more predictable pricing model. However, this update is planned for July, which means that in the short term Ether could face price pressures. In addition, miners have expressed concern as the new proposal aims to burn some of the tariffs to create bottlenecks and cut their incomes by up to 50%.

To prepare for adverse events, professional traders generally buy protective put options without reducing their positions, especially those that cultivate and bet with high returns. Although these are usually expensive in the longer term, trading on some exchanges is also offered on a weekly or bi-weekly basis.

The put-to-call ratio favors bears, but there’s more

The expiration of the $ 161 million Ethereum option favors bulls as ETH converts the $ 2,000 level into support
The expiration of the $ 161 million Ethereum option favors bulls as ETH converts the $ 2,000 level into support

Unlike futures contracts, options are divided into two segments. With call options, the buyer can buy Ether at a fixed price on the expiry date. Generally speaking, These are used in neutral arbitrage trades or bullish strategies.

In the meantime, put options are often used to protect against negative price movements.

To understand how these competing forces balance each other out, one needs to compare the call and put options at each strike price.

For those unfamiliar with options strategies, Cointelegraph recently explained how to minimize losses despite a bullish position.

Aggregated open positions with Ether maturing on April 9th. Source: Bybt

The data above shows that the April 9 Ether expiration includes 77,800 Ether contracts valued at $ 161 million at the current level of $ 2,070. Meanwhile, The call-put rate favors the lowest put options by 11% and dominates strikes below $ 1,850. Meanwhile, bullish call options have filled the scene above $ 1,900.

Despite the imbalance, the net impact tends towards the bulls

Options markets are an all-or-nothing game, meaning they have value or become worthless if they trade above the exercise price of the call option, or the opposite for put option holders.)

Therefore, By excluding neutral to bearish put options that are 25% below the current price of $ 2,070 and call options above $ 2,480, it will be easier to assess the potential impact of the expiry next Friday. Incentives to pump or lower the price by more than 25% become less likely as the potential gains will rarely exceed the costs.

This selection attracts 33,000 call options from strikes ranging from $ 1,200 to $ 2,480, currently valued at $ 68 million. Meanwhile, The most bearish put options up to USD 1,580, equivalent to 18,100 ether contracts valued at USD 37 million. Therefore, buyers have a slight advantage for the April 9 expiry.

The balance between the call and put options initially showed a buy-sell relationship favoring the most bearish put options. However, by excluding put options that are 25% below the current price, the net result clearly favors the bulls. This reinforces the view that the April 9th ​​expiration should not be viewed as bearish.

The views and opinions expressed here are solely those of author and do not necessarily reflect the views of Cointelegraph. Every investment and trade movement is associated with risks. You should do your own research when making a decision.

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