As the crypto market starts to recover from its recent downturn, all eyes are on the expiration of a large batch of options contracts. This Friday, August 9th, around 32,000 Bitcoin options contracts, with a total notional value of about $1.9 billion, are due to expire. Additionally, 206,000 Ethereum options, worth $560 million, will also reach their expiration, bringing the total value of expiring crypto options to a significant $2.5 billion.
How Crypto Options Expiry Influences Markets
The expiration of options often impacts market movements, especially when the notional value is as substantial as it is this week. Despite these large numbers, this week’s expiry is slightly smaller than the previous week’s, which suggests that its immediate influence on spot prices might be less pronounced.
This week’s Bitcoin options have a put/call ratio of 0.71, indicating that more call (long) contracts are set to expire compared to puts (shorts). The max pain level—the price at which the majority of losses occur for option holders—is positioned at $60,000, just below today’s spot price after a recent rally.
Interestingly, there is still considerable open interest (OI) in contracts with strike prices at $65,000, $70,000, and $75,000, signaling that some traders anticipate potential gains. However, it’s worth noting that implied volatility (IV) for longer terms has decreased but remains above pre-crash levels. This reflects the market’s lingering uncertainty and potential for continued volatility, as noted by crypto derivatives provider Greeks Live.
Ethereum Options Expiry and Market Trends
The Ethereum options set to expire have a put/call ratio of 0.96, with the max pain point at $2,950, which is above the current spot price. Despite this cautious outlook, the overall crypto market has shown signs of recovery. On Thursday and into Friday’s Asian trading session, total market capitalization rose to $2.23 trillion, driven largely by Bitcoin’s strong performance and Ethereum’s recovery, fueled by retail investors taking advantage of lower prices.
Broader Market Implications
Beyond the immediate impact of options expiration, there are other notable developments in the crypto options landscape. The CBOE has recently filed an updated rule change proposal to allow options trading on spot Bitcoin ETFs. This follows earlier efforts by the CBOE, Nasdaq, and NYSE American, which faced resistance from the SEC earlier this year. Bloomberg ETF analyst James Seyffart speculates that this refiling could indicate some level of feedback from the SEC.
On the Ethereum side, Grayscale, Bitwise, and NYSE American have applied to the SEC to list options on three spot Ether ETFs. These options would provide traders with more flexibility compared to futures contracts, allowing them to sell at a specific price or date.
Conclusion
As the market watches the $2.5 billion in crypto options expire, the key question is whether this will generate enough momentum for a sustained market rally, or if it will be just a temporary fluctuation. While today’s expiration event may not have the dramatic impact of larger expiries, it underscores the significant influence that derivatives have on market dynamics. Traders should monitor market reactions closely, especially given the ongoing volatility and uncertainty that continue to shape the crypto market.
