On February 5, the open positions for Bitcoin (BTC) options totaling $ 1 billion will expire. That number is small compared to last month’s expiration of the $ 4 billion options, but monthly and quarterly options usually focus on the most volume.
The expiration on Friday is a bit unusual, although it is balanced at the current BTC level. Data also shows that bulls have many incentives to push the price above $ 38,000.
The Deribit Exchange holds a market share of 84% at the end of Friday. Analyzing the total open positions between $ 28,000 and $ 43,000 results in neutral to bullish call options valued at $ 300 million, stacked against $ 290 million open positions from put options.
Hence, by analyzing strikes that are 25% above or below the current BTC price, there is practically a balance on both sides.
As per the data above, the neutral to bearish put options are concentrated at USD 34,000 and below. There is a perfect balance between $ 34,000 and $ 36,000 strikes as both call and put options are equally matched.
Despite the under $ 32,000 discrepancy, the incentive to push the price down creates an imbalance of 3,400 BTC contracts. This equates to an open stake of $ 109 million for a negative price movement of 13% or more. While nominally significant, it doesn’t seem enough to create the incentives needed to surprise the bulls.
On the other hand, if bulls tried to prop the price at $ 38,000, it would create an imbalance of 2,800 BTC contracts. This situation corresponds to an open interest of USD 106 million for a positive price fluctuation of 4% and thus a better risk return for such an effort.
To assess whether market makers and arbitrage desks rate the risk of upward or downward movement, the delta offset of 30% to 20% is the most useful indicator. It measures the premium difference between the neutral to bullish call options that are stacked against similar put options.
Numbers between 0 and 15 are considered neutral, while a negative delta offset indicates that large options traders are charging an additional premium to take downside risk, which is considered bearish.
The last time such a situation occurred was on December 29th, and for the past five days the indicator has been at 10. This data shows a perfect balance between risks, which means that there is no incentive for market makers and arbitrage Desks are there to put pressure on BTC on both occasions as the February 5th expiration approaches.
OKEx, Bit.com and Deribit weekly contracts expire on February 5th at 8:00 a.m. (UTC).
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