$600M in Bitcoin options expire on Friday, giving bears reason to pin BTC under $16K

1 year ago

No 1 tin blasted Bitcoin (BTC) bulls for placing bets astatine $20,000 and higher for the $600 cardinal play options expiry connected Nov. 18. After all, this level had provided a coagulated absorption since Oct. 25 and held for astir 2 weeks.

However, the basal script changed abruptly connected Nov. 8 aft a liquidity situation halted withdrawals connected the FTX exchange. The question amazed traders and implicit a 48-hour timespan, implicit $290 cardinal successful leverage buyers were liquidated.

The marketplace rapidly adjusted to the news, ranging from $15,800 to $17,800 for the past 7 days. At the moment, investors are acrophobic that contagion risks mightiness unit different cardinal players to merchantability their cryptocurrency positions.

FTX held important deposits from cardinal manufacture players, truthful its demise meant different participants would besides look important losses. For example, BlockFi held a $400 cardinal recognition line with FTX US. On Nov. 15, collateralized output level SALT disclosed important losses from the FTX illness and subsequently halted withdrawals.

Similar events happened astatine the Japanese cryptocurrency speech Liquid, expanding the uncertainty level successful the full market.

The Nov. 18 options expiry is particularly applicable due to the fact that Bitcoin bears tin unafraid a $120 cardinal nett by suppressing BTC beneath $16,500.

Bulls placed their bets astatine $20,000 and higher

The unfastened involvement for the Nov. 18 play options expiry is $600 million, but the existent fig volition beryllium little since bulls were overly-optimistic. These traders missed the mark, placing bearish bets astatine $18,000 and higher, portion BTC was dumped pursuing the FTX insolvency.

The 1.00 call-to-put ratio shows the cleanable equilibrium betwixt the $300 cardinal enactment (sell) unfastened involvement and the $300 cardinal telephone (buy) options. Nevertheless, arsenic Bitcoin stands adjacent $16,500, astir bullish bets volition go worthless.

If Bitcoin's terms remains beneath $17,500 astatine 8:00 americium UTC connected Oct. 21, lone 10% of these telephone (buy) options volition beryllium available. This quality happens due to the fact that a close to bargain Bitcoin astatine $18,000 oregon $19,000 is worthless if BTC trades beneath the expiry price.

Bulls request a pump supra $18,000 to travel retired ahead

Below are the 4 astir apt scenarios based connected the existent terms action. The fig of Bitcoin options contracts disposable connected Nov. 18 for telephone (bull) and enactment (bear) instruments varies, depending connected the expiry price. The imbalance favoring each broadside constitutes the theoretical profit:

Between $15,500 and $16,500: 400 calls vs. 7,900 puts. The nett effect favors the enactment (bear) instruments by $120 million.
Between $16,500 and $17,500: 1,700 calls vs. 6,100 puts. The nett effect favors the enactment (bear) instruments by $75 million.
Between $17,500 and $18,000: 2,500 calls vs. 5,000 puts. The nett effect favors the enactment (bear) instruments by $45 million.
Between $18,000 and $18,500: 4,500 calls vs. 3,100 puts. The nett effect favors the telephone (bull) instruments by $25 million.

This crude estimation considers the enactment options utilized successful bearish bets and the telephone options exclusively successful neutral-to-bullish trades. Even so, this oversimplification disregards much analyzable concern strategies.

For example, a trader could person sold a enactment option, efficaciously gaining affirmative vulnerability to Bitcoin supra a circumstantial price, but unfortunately, there's nary casual mode to estimation this effect.

BTC terms dips beneath $16,000 should not beryllium surprising

Bitcoin bears request to propulsion the terms beneath $16,500 to unafraid a $120 cardinal profit. The bulls' best-case script requires a 10% pump supra $18,000 to flip the tables and people a $25 cardinal gain.

Considering that Bitcoin borderline and options instruments amusement low assurance successful regaining the $18,500 support, the astir apt result for Friday's expiry favors bears. Bulls mightiness beryllium amended served by throwing successful the towel and concentrating connected the Nov. 25 monthly options expiry.

The views and opinions expressed present are solely those of the writer and bash not needfully bespeak the views of Cointelegraph.com. Every concern and trading determination involves risk, you should behaviour your ain probe erstwhile making a decision.

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