$4.3 Billion Bitcoin & Ethereum Options Expire Today

Despite Bitcoin (BTC) showing strength over the last few days, traders and investors should expect some volatility during the early hours of the European session on Friday amid the anticipation of options expiry.

However, the impact could be short-lived, given that markets quickly adjust to new trading environments shortly after.

What Traders Should Know About Today’s Options Expiry

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Data on Deribit shows that over $4.3 billion in Bitcoin and Ethereum (ETH) options will expire today. For Bitcoin, the expiring options have a notional value of $3.5 billion and a total open interest of 30,208.

With a Put-to-Call ratio 1.23, the maximum pain level for today’s expiring Bitcoin options is $114,000.

For their Ethereum counterparts, the notional value for today’s expiring ETH options is $806.75 million, with total open interest of 177,398.

Unlike Bitcoin, however, today’s expiring Ethereum options have a Put-to-Call Ratio (PCR) below 1, with Deribit data showing 0.99 as of this writing. Meanwhile, the maximum pain level, or strike price, is $4,500.

The maximum pain point is a crucial metric in crypto options trading. It represents the price level at which most options contracts expire worthless. This scenario inflicts the maximum financial loss, or “pain,” on traders holding these options. 

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Notably, today’s expiring Bitcoin and Ethereum options are slightly higher than last week’s. On September 12, BeInCrypto reported nearly $4.3 billion expiring options, highlighting 29,651 BTC and 189,700 ETH contracts, with notional values of $3.42 billion and $858.2 million, respectively.

However, the main difference between this week’s expiring options and those seen last week is that this time, Ethereum expiring options have a PCR below 1.

A PCR below 1 indicates that more Call (Purchase) options are traded than Put (Sale) options. Therefore, this suggests a bullish market sentiment for Ethereum, and bearish sentiment for Bitcoin, which has more Puts than Calls.

Nevertheless, Bitcoin’s PCR at 1.23 and Ethereum’s at 0.99 suggest an almost balanced bet among traders between sale and purchase orders.

This balanced outlook comes as investors speculate whether the market will move higher or are hedging their portfolios in case of a sell-off.

Options Market Signals Caution After Fed Cut as Record Expiry Looms

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In hindsight, it is worth noting that options had repriced ahead of the Federal Reserve’s interest rate decision on Wednesday.

With this, implied volatility for options contracts rose while trading volume declined, suggesting market caution.

“Options are repricing ahead of the Federal Reserve’s interest rate meeting, with implied volatility on options expiring tomorrow rising significantly. Recent actual volatility has also been substantial, showing a marked increase compared to last month, yet actual trading volume has declined instead,” analysts at Greeks.live had noted.

Glassnode highlights a post-rate-cut patience in the market, with Bitcoin trading above 115,200 and 95% of supply in profit after the FOMC rally.

“Futures show short squeezes, and options open interest hit a record 500,000 BTC ahead of the September 26 expiry. Holding above 115,200 is key while a drop risks a move back toward 105,500,” wrote Glassnode analysts.

Meanwhile, it is worth noting that next Friday, September 26, the largest weekly Bitcoin options expiry in history will be seen. On that day, over $18 billion in notional value will expire.

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At the $118,000 Bitcoin price level, over $2.4 billion is in the money, with a maximum pain of $110,000. The Put open interest is minimal until $110,000.

Therefore, next week could be interesting. The margin usually drives short-term price action, so markets should not be surprised to see a flush despite the sentiment.

In the meantime, however, traders should brace for volatility because the max pain concept often influences market behavior.

According to the Max Pain theory, the asset’s price tends to gravitate toward this level as options near expiration.

As the options near their expiry time, 8:00 UTC on Deribit, the Bitcoin price, trading for $117,147 as of this writing, could pull toward its max pain at $114,000. Meanwhile, Ethereum, which was trading for $4,590, could drop toward $4,500.

Nevertheless, markets usually stabilize soon after traders adapt to the new price environment. With today’s high-volume expiration, traders and investors can expect a similar outcome, potentially influencing market trends into the weekend.