62,000 Bitcoin (BTC) options expire on Friday, equivalent to $ 830 million in open interest. These huge numbers do not reflect the fact that 58% of these options are now considered useless.
Call (buy) options above the current level begin to decline very quickly as the expiration date approaches. You shouldn’t be paying $ 20 for an opportunity to buy a $ 14,500 BTC on a Friday morning. Therefore, it is not helpful to carry options over to the next month.
With less than 48 hours left before the October expiration date, Call Options are more than $ 14,500 USD and are less likely. The same can be said for the $ 11,500 put (sales) options, which are currently trading for less than $ 10 each.
Deribit leads the way with 70% market share of still-worth options. There are currently $ 134 million in put options from $ 11.5 to $ 13.5K and $ 45.5 million in put options ($ 12.5 to $ 14.5K). Hence, bulls prefer bears in a ratio of 3: 1.
CME is still under construction with 26% of the Bitcoin options market for October. The call (buy) options close to the current market level are valued at $ 72 million, while the put options are less than $ 1 million. This move isn’t much different from previous expiration dates, as CME options tend to be completely bullish.
So there is currently a $ 160m imbalance in favor of the bulls in the BTC options markets. This is a convenient number, given that expiration occurs on time. OKEx, Deribit, and futures options expire at 8:00 UTC on October 30, and in CME a few hours later at 16:00 UTC.
The open interest in futures contracts usually falls before maturity
Many traders believe that the open interest in Bitcoin futures of $ 5.4 billion expires on Friday. Most of these agreements are permanent (reverse swap) or have a later date.
The Chicago Mercantile Exchange leads this time with an open interest of $ 360 million for October, but it is significant. This performance value will drop sharply before the expiration date as traders move their positions in the coming months. Proof of this is that open interest due on the Chicago Mercantile Exchange in October fell by $ 130 million yesterday.
Regardless of the size of the investor’s profit or loss, it is possible to transfer the position to the next maturity date. Unlike the options markets, futures contracts do not weaken as the last trading day approaches.
The future margin is adjusted daily, which means that the buyer of the (long) contract receives money from the seller (short) when the bitcoin trades up, and vice versa if the bitcoin price closes. Both parties can benefit from trading their positions if there is sufficient margin to hold them.
For professional traders, the futures premium is the most useful indicator of whether these investors are up or down. At the time of writing, OKEx is top of the remaining exchanges with $ 69 million ending on Friday, followed by Huobi at $ 23 million.
This number is known as baseline and typically ranges from 5% to 15% on an annual basis. When the premium is positive, the market is described as Contango. Meanwhile, levels below 5% indicate a moderate bearish tone.
Negative premium on futures is very unusual and usually associated with liquidity problems.
As you can see from the chart above, investors were optimistic in August when monthly futures traded at a premium of 25% or higher. This resulted in bitcoin prices rising 30% from $ 9.1K to $ 11.9K.
The core index is currently around 14%, and is on the verge of a very bullish territory. Remember, any bull trade that has been exploited in the past six months is currently profitable.
Meanwhile, open interest on Bitcoin futures more than doubled to $ 5.4 billion from $ 2.6 billion in April.