A Record $11B Crypto Options Expiry Looms as BTC Shows Little Volatility

A Record $11B Crypto Options Expiry Looms as BTC Shows Little Volatility

Bitcoin (BTC) remains well supported, holding above $40,000 as the clock ticks down to 2023’s last quarterly options expiry.

As the clock ticks down to the last quarterly options expiry of 2023, bitcoin (BTC) remains well supported, holding above $40,000.

With $7.7 billion worth of options expiring on Friday at 08:00 UTC, the crypto exchange Deribit is set to see a flurry of activity. $3.5 billion of options linked to ether (ETH) will also expire on that day.

On Deribit, one options contract represents one BTC or one ETH. An in-the-money call option is one with a strike price lower than the market rate.

For a put, an in-the-money strike price is higher than the going rate. This means that if the market price of BTC/ETH is $6000, and you have a $5,000 call option with a strike price of $4000, then your option is “in the money” because the market price is above the strike price.

Why the scramble for upside exposure?
Bitcoin and ether prices have been on the rise lately, with bitcoin prices up 60% over the past quarter and ether prices up 43%.

This has investors scrambling to add upside exposure to their portfolios, which is why there is a record notional open interest for in-the-money call options.

According to Strijers, clients have been rolling their positions from the December expiry to contracts expiring in January and subsequent months. The process could continue into Friday’s quarterly settlement.

“Beyond hedging, we also see clients rolling positions to 2024 expiries and expect to see more of that closer to the expiry as well as afterward,” Strijers said. “After the expiration, all eyes and trading activity will be focused on the upcoming ETF decision.”

This week, many traders are rolling their positions from the December expiry to contracts expiring in January and subsequent months. Strijers says that the process could continue into Friday’s quarterly settlement.

“Beyond hedging, we also see clients rolling positions to 2024 expiries and expect to see more of that closer to the expiry as well as afterward,” Strijers said. “After the expiration,

The U.S. Securities and Exchange Commission is expected to approve an exchange-traded fund (ETF) that invests directly in bitcoin on Jan. 10, a so-called spot ETF, rather than one investing in futures tied to BTC.

Many industry participants expect it to give the green light to a spot fund, paving the way for continued upside price volatility in the historically bullish reward halving year.

Although Chang expects prices to remain steady before Friday’s expiry, he warns that the MPP (Market Price Protection) could cause a significant price swing.

For example, if BTC was to reach MPP of $33,000 and ETH reached MPP of $1,900, the prices would be much different than they are today. However, Chang believes that this is unlikely to happen and that investors should not worry about MPP at this moment.

“I’ll be keeping a close eye on any new options trading tapes in the aftermath of the big options expirations. I also think the market is heading towards the final spark, and I expect the last real move to happen very soon,” Chang said.

Leave a Comment