Regardless of the market’s condition, Bitcoin (BTC) options contracts worth roughly $4 billion will expire by Friday. According to past option contracts expiration, this huge amount could impact the Bitcoin market significantly over the weekend.
Similar to cryptocurrency futures contracts, options are financial derivatives that allow traders to buy or sell an asset at a pre-established price on a future date.
$4 Billion Bitcoin Option Contract To Expire
According to data from Amberdata, the quarterly option contracts on the biggest crypto options exchange, Deribit is set to expire by Friday. These contracts include call options (buy) of 81,052 worth $2.24 billion and 60,261 put options (sell) worth $1.73 billion.
A put option allows an investor to sell assets at an agreed price on or before a particular date. In contrast, a call option is a contract that allows traders to buy assets at an agreed price on or before a given date.
On the Deribit exchange, an option contract is parallel to just one BTC. Deribit is one of the leading crypto-based derivative exchanges in the market. It offers futures, options, and perpetual swaps for Bitcoin and Ethereum.
Having the highest volume and open interest among other options exchanges, Deribit accounts for over 60% of the global crypto options activity. Out of its double-digit owned option activity, the exchange will liquidate its quarterly options by 08:00 UTC on Friday.
What This Means For BTC
BTC price has fallen sharply below $28,000 after its quick spike to above $29,000 earlier today. Over the past 24 hours, more than $20 billion have been removed from its market cap following its sharp spike. BTC is currently down by 1.4% at the time of writing, with a trading price of $27,876 and a market cap of $538 billion.
According to Deribit, the last major Bitcoin options expiry happened in late December when roughly 135,000 contracts expired. Though this volume is relatively lower than that set to expire tomorrow. It resulted in a slight fall for BTC given it was already at the bottom due to the FTX crash and the Binance FUD (fear, uncertainty, and doubt).
However, since BTC has been in an upward rally since the beginning of the year, especially over the past weeks, there could be a notable movement from the asset after the BTC options for tomorrow get liquidated.
Commenting on tomorrow’s options expiry, trading desk QCP Capital shared with its followers:
Tomorrow’s large quarter-end option expiry is unlikely to provide the fireworks that other march quarter-ends have done in recent years. The speed of the recent spot move and lack of traders’ conviction have left the open interest map spread rather thinly across strikes. We are positioning ourselves short vol into tomorrow’s expiry, expecting sellers to come in ahead of the big expiry roll tomorrow, and before buyers step in again next week.
Featured image from Unsplash, Chart from TradingView