Bitcoin, Ethereum brace for $17b options expiry this Friday

The crypto markets are bracing for major volatility as $17B Bitcoin, Ethereum options are set to expire on Friday.

Summary

• Over $17 billion worth of Bitcoin and Ethereum options contracts expire on Friday
• Out-of-the-money options dominate trader holdings, at 82.5% of open interest
• Timing overlaps with major macro events, which could amplify volatility

Crypto markets are bracing for a major volatility-inducing event. On Friday, October 31, over $17 billion worth of Bitcoin and Ethereum options contracts are set to expire on the crypto derivatives exchange Deribit.

For Bitcoin (BTC), 72,716 BTC call option contracts and 54,945 BTC put option contracts, worth a total of $14.4 billion, will expire on Friday. On the other hand, $2.6 billion in Ethereum (ETH) options are set to expire the same day.

As calls dominate puts, traders are betting that BTC will go up before the expiry. Notably, for Bitcoin, the maximum pain level is at $114,000, which is the level where most options will be worthless. This is significant, as market makers can hedge in a way that pulls the price toward this level, especially near expiry.

For traders, there is a clear preference for speculative positioning. 82.5% of the options contracts are out-of-the-money, which means that traders do not hedge their positions. Instead, these options are bets on the future price of BTC and ETH.

Bitcoin, Ethereum options expiry could trigger volatility

Options expiry events typically increase volatility in the market. They can trigger large spot market moves as traders unwind their positions and rebalance their portfolios. This effect is even greater when there is a large amount of out-of-the-money options.

The event also coincides with major macro events, including the FOMC interest rate decision and major company earnings. These events could further amplify short-term volatility in the market.