Blockchain
Bitcoin and Ether options worth $10 billion will expire on Friday
It’s that time again when discussions about crypto derivatives business take precedence.
Friday at 08:00 UTC, bitcoin (BTC) options worth $6.68 billion and ether (ETH) options worth $3.5 billion will expire on leading crypto derivatives exchange Deribit.
The imminent deadline, which represents over 40% of the current cumulative open interest of over $23 billion, could trigger a spike in market volatility. Large quarterly maturities often lead to greater volatility, making prices more unpredictable due to higher trading volumes and position closures/resets.
“As we approach the big quarterly deadline on Friday, potentially impacted by ‘quadruple witchcraft‘ and related volatility in US stock markets, more than 25% of Deribit’s open interest will expire in-the-money, amounting to more than $2.7 billion. The total notional size of the maturity is over $10 billion,” said Luuk Strijers, CEO of Deribit, in an interview with Coindesk.
Options are derivative contracts that give the holder the right but not the obligation to buy or sell the underlying asset at a predetermined price by a specific date. A call gives you the right to buy, while a put gives you the right to sell. On Deribit, an options contract represents one BTC or ETH.
Having more than 25% of open interest set to expire in the money means that a significant number of derivative contracts are expected to be profitable to their holders at expiration.
Bitcoin, the leading cryptocurrency by market value, has fallen nearly 9% this month, putting a strain on bargain hunters under $60,000. As usual, the sell-off weighed on the broader market, sending Ether down nearly 10%.
“The recent price drop was caused by miner sell-offs, some pressure from the German-seized BTC, and of course the upcoming Mt. Gox coin transfer scheduled for early July,” Strijers said.
However, according to data tracked by Amberdata, call-put distortions show that investors are willing to pay a higher premium for short- and long-term calls that offer asymmetric upside compared to puts.
“Although short-term bearish sentiment is evident, traders anticipate a positive move for Bitcoin by July 12 and ETH by July 5, considering the options bias. ETH ETF trading is expected to begin in the first week of July,” Strijers noted.