Over the past two months, open interest in Ether (ETH) options rose 50% to $ 3.1 billion, with ETH price gaining 44% over that period. The rise in the price of ether and soaring open interest in options resulted in a potentially historic decay of $ 1.15 billion on March 26th.
Most exchanges offer monthly exposures, but some also offer weekly options for short-term contracts. February saw the largest decline ever, with options contracts valued at $ 630 million, a figure representing 23% of all open positions at the time.
The data above shows that Ether’s expiration on March 26th includes 631,000 ETH contracts. This unusual concentration means that 39% of open positions expire in eight days.
It’s worth noting that not every option will trade when it expires, as some of these strikes now sound inappropriate, especially considering there is about a week left.
Not all options are created equal
Unlike futures contracts, options are divided into two segments. Call (Buy) options allow the buyer to purchase Ether at a fixed price on the expiration date. Generally these are used either for neutral arbitrage trades or for bullish strategies.
In the meantime, the put (sell) options are usually used as a hedge or protection against negative price fluctuations.
To understand how these competing forces are balanced, one should compare the calls and set the option size at each strike.
Options markets are an all-or-nothing game, meaning they either have value or become worthless if they trade above the call strike price, or the opposite for put option holders.
Therefore, by excluding the neutral to bearish put options, which are 20% below the current price of $ 1,800 and the call options above $ 2,160, it is easier to assess the potential impact of the expiry next Friday. Incentives to pump or lower the price by more than 20% become less likely, as the potential gains will rarely exceed the costs.
Based on this data, $ 160 million worth of call options remain between $ 1,000 and $ 2,160 for the total options expiration on March 26th. Meanwhile, the more bearish put options stand at $ 1,440 to $ 95 million. Hence, there is a $ 65 million imbalance that favors the more bullish call options.
Bulls can show up after this month is up
While a $ 1.15 billion expiration of the options could be worrying, nearly 56% of them are already considered worthless. This was caused by excessive optimism from buyers of call options above $ 2,160 and the recent rise in the price of Ether, which resulted in the destruction of neutral to bearish puts.
As for the remaining open positions, bulls are mostly in control as the recent price hike to $ 1,800 wiped out 83% of the bearish options.
As the expiration date approaches, a growing number of put options will lose their value if ether remains at current levels, increasing the advantage of neutral to bullish call options.
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