Crypto options market surges
According to data tracked by Switzerland-based Laevitas, the locked dollar value of active Bitcoin and Ethereum options contracts on Deribit has reached a notional open interest of $20.64 billion. This figure is almost identical to the peak recorded on November 9, 2021, when BTC traded above $66,000, up more than 90% from $34,170. In other words, current contract open interest is significantly higher than in November 2021.
Commenting on the matter, Luuk Strijers, Chief Commercial Officer at Deribit, said: “This milestone not only represents a significant win for Deribit, but is a clear indication of the growing appetite among our clients for choice and broader market growth, with nearly doubling the number of outstanding contracts.”
Options are derivative contracts that give the buyer the right (but not the obligation) to buy or sell an underlying asset at a predetermined price on or before a certain date. Buying a call option gives the buyer the right to buy, while buying a put option gives the buyer the right to sell. Buyers of call options indirectly indicate a bullish market trend, while buyers of put options indirectly indicate a bearish market trend.
Record activity in cryptocurrency options means that investors and market makers will have more influence in determining spot market prices. Current data shows that market makers recently held a net short gamma position in Bitcoin. This suggests that option holders bought the largest cryptocurrency as prices rose to offset their overall risk and may have inadvertently accelerated price increases.
$4.5 billion worth of BTC and ETH options contracts expire today
At 11:00 AM GMT today, $4.5 billion worth of BTC and ETH options contracts on Deribit will expire. Monthly and quarterly expiration dates are known to increase volatility in the cryptocurrency market.
Most of Bitcoin’s open interest is concentrated in in-the-money (ITM) call options, or call options that are below the market price of Bitcoin. Investors have been buying in the past two weeks as Bitcoin has risen from $27,000 to $35,000. In-the-money options are call options where the current market price of the underlying asset is higher than the strike price. When the price of the underlying asset is below the option’s strike price, it is said to be in-the-money (ITM).
Regarding today's expiring options contracts, Strijers said: "The $4.5 billion worth of options expiring is significant. This is a particularly high value and a significant portion of the ITM will expire due to the potential impact of recent market movements."
