BTC and ETH options expiry on Friday, September 24, will see the settlement of 117,000 BTC options contracts and 1.1 million ETH options contracts, with a notional value of $4.8 billion. Options are derivatives that provide the buyer with the right to purchase or sell the underlying asset at a predetermined price on a future date. For the September expiry options, the max pain levels for bitcoin and ether are $26,500 and $1,650, respectively. Max pain is the point at which options purchasers stand to lose the most money upon expiration.
Market makers, or entities responsible for creating liquidity in an order book, attempt to hedge their gamma exposure and maintain a market-neutral book by actively buying and selling the underlying asset as the expiry date approaches. Gamma is the rate of change of delta, which measures the sensitivity of an option’s price to fluctuations in the price of the underlying asset.
In the past month, the markets have remained stable, while the gamma of the September expiries has gradually increased as a function of time. If there were an uneven distribution of gamma among traders, it would have resulted in much higher volatility than what we have seen in recent days. As a result, we do not expect significant market movements in the coming week.
Ether dealers predominantly hold long gamma positions near $1,650-$1,700, which suggests that these levels could act as a magnet leading up to the expiry. The likelihood of price stabilization is very high. The option expiring on September 29 has a substantial positive gamma. As the expiration date nears, the gamma will grow larger and more influential, exerting a strong pull on the price.
Impact of BTC and ETH Options Expiry on Market
The upcoming BTC and ETH options expiry may have several effects on the market. First, it could lead to increased trading volume as traders seek to close their positions or roll them over into new contracts. This increased activity could result in short-term price fluctuations, especially if there is a significant imbalance between buyers and sellers.
Second, the options expiry may influence the price of the underlying assets, as market makers and other traders adjust their positions to hedge their exposure. This could lead to temporary price distortions, which may present opportunities for savvy traders to profit from the market’s inefficiencies.
Price Stabilization and Peak Gamma Exposure Levels
As we approach Friday’s quarterly settlement, the price is more likely to be near the peak gamma exposure levels, which are $26,000-$27,000 for BTC and $1,500 or $1,650 for ETH. This could result in a period of price stabilization, as market participants adjust their positions to minimize their losses or lock in gains.
It is essential for traders and investors to monitor the market closely during this time, as the BTC and ETH options expiry could create short-term volatility and present opportunities for profit. By understanding the dynamics of options expiries and their potential impact on the market, traders can better position themselves to take advantage of these events and navigate the market with greater confidence.
In conclusion, the upcoming BTC and ETH options expiry on Friday is a significant event for the cryptocurrency market, with a notional value of $4.8 billion at stake. While we do not anticipate significant market movements in the coming week, traders should be aware of the potential for short-term volatility and price stabilization near peak gamma exposure levels. By staying informed and understanding the mechanics of options expiries, market participants can better navigate these events and capitalize on potential opportunities.
