Bitcoin, Ethereum face $ 5 billion options expire today

Traders and investors in the crypto market should be scrambling for volatility as $5.26 billion worth of Bitcoin and Ethereum options expire today.

Specifically, Bitcoin (BTC) options hold a total of $4.25 billion in notional value, while Ethereum (ETH) options hold $1.01 billion. Thus, markets anticipate the impact of the expiration of such broad contracts.

$5 billion means Bitcoin, Ethereum options will run out.

According to data on Deribit, the broad range of 62,657 Bitcoin options contracts expires on October 25, with a call to call ratio of 0.66 and a maximum pain point of $64,000.

At the same time, the Ethereum options market is set to expire with 403,426 contracts. Today's expiring Ethereum contracts have a call ratio of 0.97 and the maximum pain point is $2,600.

Read more: Introduction to Crypto Options Trading.

The call ratio is an important sentiment indicator in options trading. It compares the volume of put options with call options. This scale is less than 1 and generally indicates that many investors are anticipating market gains. On the other hand, a ratio above 1 usually indicates bearish sentiment, indicating concerns about a market downturn.

Meanwhile, based on BeInCrypto data, Bitcoin is trading as high as $67,962 as of this writing, while Ethereum is trading at $2,490. This means that when BTC trades above the highest color point, Ethereum trades below it.

Cost implications based on high pain point theory

If the price of Bitcoin is currently above its maximum pain point, if the options pass through the current level, it will generally indicate losses for the option contract holders. The reverse applies to Ethereum, which is to take advantage of options below the strike price. This is based on Max Payne's theory, which predicts that option prices will converge around strike prices when a large number of contracts – calls and similar – end up being worthless.

Therefore, as the options expire, Bitcoin and Ethereum prices are likely to approach their respective peak pain points. This means that BTC price can go down and ETH price can go up due to movement calculated by smart money. However, the pressure on the prices of BTC and ETH will decrease after Friday 08:00 UTC, when Derbit contracts will settle.

It is also worth mentioning that the amount of BTC and ETH options expiring today is much higher than what was seen in the month. BeinCrypto reported $1.4 billion in the trading week ending October 4, followed by $1.6 billion at the end of October 11.

Subsequently, up to $1.62 billion worth of option contracts were expired for the week ending October 18. More than $5 billion in jump options are expiring and therefore have a continuous upward trend. Meanwhile, Bluefin Academy analysts say there has also been a significant shift in implied volatility (IV) ahead of the US election.

“The change in implied volatility first shows the effect of the option on the expected volatility of the crypto market. For BTC or ETH options, the level of implied volatility on November 8 increased significantly and exceeded that of the far-month options,” the analysts said.

They say that the change in IV is the hedging and speculative interests of investors. The analysts observed a relatively high increase in the BTC “Election Day Option”. This shows that BTC is relatively more sensitive to macro events. For now, however, most investors remain on the sidelines, limiting the amount of volatility expected in October.

Read More: 9 Best Crypto Options Trading Platforms

“Interestingly, investors seem to believe there won't be much volatility for the rest of October. As most investors are on the sidelines ahead of the election, the performance of the crypto market is mainly a consolidation, which boosts investors' confidence in low volatility. Of course, affected by supply, demand and sentiment, options expiring on Nov. 8 have become more expensive, analysts at Biofin Academy added.

According to analysts, another influencing factor is policy uncertainty at the Federal Reserve in the US.