$1.3 Billion in Bitcoin Options Set to Expire Today

In letter

  • Almost 80,000 bitcoin options contracts expire today.
  • This could lead to an increase in the volatility of the Bitcoin price.
  • Bitcoin’s price is recovering from a recent market crash.

According to the crypto analytics platform Skew, around 78,000 Bitcoin (BTC) option contracts worth around $ 1.3 billion at current prices expire today.

Options contracts give buyers the right – but not the obligation – to buy assets at a specified price at a specified time in the future for which they pay sellers a “premium”. If the price of the asset is higher than the agreed price on the expiration date, buyers can execute the contract and receive profit or refuse the premium paid and lose.

At press time, Bitcoin options open positions totaled $ 5 billion, an increase of nearly 100% in just one month. According to data from Skew, open interest as of October 31st was around $ 2.7 billion.

Total bitcoin options open interest. Image: inclination

Bitcoin was trading at around $ 13,500 per coin in early November and has soared to over $ 19,000 in recent days. This means that an increase in open interest is due in part to the growth in Bitcoin price.

The unregulated crypto derivatives platform Deribit remains the leader in terms of total open positions in BTC options with outstanding contracts valued at $ 3.8 billion, according to Skew. By comparison, institutional investor-targeted CME have signed BTC contracts worth $ 286 million, while OKEx and Bit.com have $ 273 million and $ 309 million, respectively.

Measured by the distribution of BTC options across different platforms, hedge funds and retail investors still account for the majority of BTC options activity.

“I would say that for institutional investors, you have to watch volume growth at CME. Deribit will mainly consist of crypto hedge funds and private investors, ”said Bobby Ong, COO of the crypto analytics platform CoinGecko Decrypt.

Last month, the total open positions for BTC options on Deribit increased from $ 2 billion on November 1 to $ 4 billion on November 25, according to Skew. In contrast, CME saw its open positions increase from $ 247 million to $ 286 million over the same period.

When such a large volume of Bitcoin options expires in a day, it can lead to an increase in price volatility.

“Every last week of the month when the monthly bitcoin options expire, we tend to see wild swings in bitcoin prices, and this month is no different,” Ong added.

Although what could be more more volatile than a drop of $ 3,000?