$8.1B in Bitcoin Options Expires This Month – Bulls or Bears Dominating?
Bitcoin (BTC) is set to complete its second largest monthly options in 2024, with a total exposure of $8.1 billion. The question is: Is this enough to fuel a strong rally toward $70,000, or are bearish incentives too strong to ignore?
The current macroeconomic environment favors risk assets, including Bitcoin, and the September 27 options expiration will be a critical event. If Bitcoin holds above $63,000, holders of neutral-to-energy options are well placed to book capital. However, bears have enough momentum to curb this gain by pushing Bitcoin's price below $60,000. Therefore, analyzing the position of the options market and its impact on monthly expiration is crucial.
On September 24, China's stock market rose after the People's Bank of China (PBOC) announced plans to reduce borrowing costs and increase liquidity in the economy, including loan repayment programs. In addition, the PBOC pledged $113.8 billion to support the stock market, including share purchases and buybacks. “There is still room for further easing in the coming months,” commented Lin Song, chief economist for Greater China at ING, according to Yahoo Finance.
In essence, China has mirrored the more accommodative US monetary policy, which favors riskier assets like Bitcoin. By stimulating the economy and lowering interest rates, central banks are reducing demand for fixed-income investments, thereby exacerbating inflation. In such environments, very limited resources like Bitcoin, especially when the S&P 500 is less than 1% away from recent highs and home prices in the 20 largest US metro areas have increased by 5.9% over the past 12 months. According to the Case-Shiller index.
Given these favorable macroeconomic conditions, Bitcoin bulls will likely hold the $63,000 level until September 27 and push for a push to $65,000. However, to assess the likelihood of this bullish move, it is important to examine how Bitcoin options traders are positioned prior to expiration.
Cumulative Sep 27 Bitcoin Options Open Interest, USD. Source: Laevitas.ch
From a broader perspective, with $4.9 billion worth of Bitcoin call (buy) options, open interest for put (sell) options is 53% higher than $3.2 billion. Although this is not unusual – crypto traders are often bullish – the excessive optimism reflected in the bets on Bitcoin prices of $90,000 and above seems to be overly ambitious, especially with less than three days before these options expire.
In fact, 55% of call options are settled at a strike price of $70,000 or more, which means $2.22 billion in notional value is likely to be exercised by September's monthly expiration. Similarly, 69 percent of outstanding options are settled at $56,000 or less, making them worthless at expiration, reducing the outstanding notional value to about $1 billion.
Bitcoin call (buy) options are well positioned, favoring the bulls
Below are the four most likely scenarios based on current price trends. The availability of call and put options for September 27 will vary depending on the Bitcoin settlement price at the time.
This assumption is based on the fact that call options are primarily used for bullish positions, while options are used in neutral-to-bearish strategies. However, it is important to note that this is a simplified procedure and does not account for more complex investment strategies.
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Between $57,000 and $58,000: The net result backs the put (put) options at $250 million. Between $58,000 and $60,000: The net result is expected to be roughly balanced between calls and options. Between $60,000 and $62,000 the call results in favor (buy) options at $550 million. Between $62,000 and $64,000: The net result supports call (purchase) options at $1 billion.
Bears are putting intense pressure on Bitcoin to drive the price below $60,000 before the September monthly expiration to avoid a $550 million profit in call options. However, given the favorable macroeconomic conditions, including interest rate cuts by the United States Federal Reserve and stimulus measures from China's central bank, the odds seem to favor Bitcoin bulls.
This article is not intended for general information purposes and should not be construed as legal or investment advice. The views, ideas and opinions expressed herein are solely those of the author and do not necessarily represent the views and opinions of Cointelegraph.
