Bulls leave ship as a $ 93 million bitcoin options imbalance favors BTC bears


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On December 11, the open positions for Bitcoin (BTC) options totaling $ 540 million will expire. That figure mimics the expiration of last month’s $ 525 million options, as monthly and quarterly options tend to focus the largest volume.

Although both dates show somewhat unusual activity, this time around the bears appear to be in control. Data also shows that the Bitcoin bulls appear to have gotten too optimistic.

The Deribit exchange currently holds a market share of 85% at the end of Friday, with call (buy) options worth USD 189 million stacked against 282 million put (sell) options. While the 1.44 put-to-call ratio favors the more bearish options, more detailed consideration is needed.

Bears were injured when BTC exceeded $ 16,000

Traders tend to have short memories, but BTC traded below $ 16,000 less than four weeks ago. Therefore, many put options have been bought around this level. This has resulted in put options of $ 120 million between $ 15,000 and $ 17,000 open.

Deribit BTC put options for the December 11th expiration. Source: Deribit

Notice, as the graph above shows, that Deribit has considerable open interest in an area that no longer makes sense after the recent BTC price surge. Some of these options previously traded for $ 365 apiece, such as the $ 16,500 launched on Nov. 28.

They are currently worth less than $ 25 each, and will lose all of their value as we near Friday’s expiration. However, that doesn’t mean the bulls hit the better end of the deal.

Cops bought over-optimistic calls

This time around, there was a decent volume of call options trading over $ 19,500. After failing to break the $ 19,800 resistance and later encounter a dip below $ 18,000, bulls overly optimistic were hurt.

To understand the result of this volatility, one has to rule out the options with poor odds. By excluding put options below $ 17,500 and call options above $ 19,500, traders can get a more realistic view of current market conditions.

Deribit holds 2,420 BTC call options ranging from $ 17,000 to $ 19,000. Bit.com is 320 BTC and OKEx currently holds 140 BTC. As such, there is an immediate $ 52 million open position supporting the current levels.

The put options between $ 17,500 and $ 19,500 on Deribit are 6,870 BTC, followed by 800 BTC on Bit.com. There is also another 290 BTC at OKEx. The immediate pressure on the sell side therefore amounts to USD 145 million in open interest from put options.

The reason for this difference is that call options were written off over $ 19,500 and have no market value. This move excludes 70% of the total open positions for call options of $ 225 million.

Deribit BTC call options for December 11th. Source: Deribit

The above data shows how extremely bullish bulls became when buying call options up to $ 22,500. Most of these options are now considered worthless, as indicated by their delta below 5%.

Therefore, analyzing only the option closer to the market level results in a sizeable $ 93 million imbalance that favors the sell side.

Although these short-term options quickly rebounded from Tuesday’s low of $ 17,640, they are currently favoring bears.

OKEx, Bit.com and Deribit weekly contracts are due on December 11th at 8:00 a.m. UTC.

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