Key conclusions
- This Friday at 08:00 UTC, 81,700 bitcoin option contracts with a nominal value of USD 6.44 billion will expire on the Deribit exchange.
- The put-to-call ratio is 0.83, which, with the dominance of call options at the levels of USD 75,000 and USD 80,000, signals the dominance of growth positions.
- Such a large accumulation of positions forces entities providing liquidity to the so-called gamma hedging, which may cause fluctuations around key strike prices.
HOT TOPIC: The $6.4B options bomb is armed 💣 81,700 bitcoin:native contracts expire Friday. Calls outnumber puts by 20%, over $500M sits within 5% of spot, and max pain lurks at $68K. Pin at $80K, breakout, or a slide? 👇 https://t.co/y1QAju2wem
Bitcoin options market structure reveals bulls’ advantage
Data from the Deribit Metrics platform shows a clear division of power. Of the total number of expiring contracts, 44,639 are call options and 37,061 are put options. This translates directly into a put-to-call ratio of 0.83. This arrangement confirms that optimistic sentiment prevails among individual and institutional investors.
Investors invested the largest concentration of capital at two price levels. The strike price set at $75,000 attracted call option open interest with a notional value of $236 million. The second most loaded point is the USD 80,000 level, where the nominal value reaches USD 157 million. At the same time, the max pain level, i.e. the price at which the largest number of contracts will expire worthless, is much lower, at USD 68,000.
The phenomenon of gamma hedging and option settlement
Options give the holder the right to buy or sell an asset at a predetermined price, without the obligation to execute the transaction immediately. When the BTC price increases so rapidly in a short period of time, liquidity providers must constantly rebalance their portfolios. The proportion of open positions forces them to buy or sell assets directly on the spot market.
In just one week, the Bitcoin Volatility Index (DVOL) increased by 30% and the index call-put skew went from negative to positive values. The term structure of volatility has also changed – z backwardation on Contango. After the price jump to USD 80,000, positions with a nominal value exceeding half a billion dollars are located in a zone of only 5% from the current valuation
The effect of fixing the course and further prospects
Such a strong accumulation of capital at selected levels leads to a mechanism known in trading as pinning. The accumulated hedging orders of market makers create a natural buffer, causing the price of the asset to tend to stabilize right at the main strike prices.
Bitcoin may tend to hover around the USD 80,000 level in the coming hours. However, breaking this zone or rejecting it decisively will lead to an immediate release of accumulated volatility. For entities managing institutional portfolios, Friday morning will become a liquidity test, the effects of which will be felt on the stock exchanges in the following days.
The information presented in the article does not constitute investment advice.
