The Number Beats August’s Record Of 62,000 Bitcoin Options, Which May Result In A Considerable Price Dip

Bitcoin may suffer from a severe volatility swing, as 47% of all Bitcoin options are set to expire this Friday, 25th of September. The open interest in Bitcoin is just five percent short of the all-time high, sitting at $1,9 billion, as of press time.

The figures signal that the options market is healthy, however, market data suggest an unusual short-term options concentration. The majority of options contracts are open on some of the world’s leading crypto exchanges - OKEx, Huobi, Deribit, Bakkt, etc.

skew btc optionsSource: Skew

Options are typically set to expire on the last Friday of each month. The concentration of the shortest options is mostly due to traders conducting a covered call strategy. The strategy includes buying Bitcoin on regular spot markets or futures markets and simultaneously selling call options. The goal is to make a profit off the massive BTC options premiums. At the expiry date, traders would liquidate their positions on both spot, futures, and options markets.

Data from Skew shows that apart from the September 25th options expiry, 31,200 Bitcoin is set to expire on Christmas day, which may also induce volatility. Skew also analyzed the BTC options implied volatility levels. During any substantial price movement, the implied volatility increases sharply, without taking into consideration whether the move is positive or negative. For instance, the implied volatility reached close to 150% during the COVID-19 market meltdown, with a prior 3-month low of 59%.

Furthermore, Chicago’s Mercantile Exchange (CME) Bitcoin Futures contracts are set to expire on the same day as the options contracts, which may further increase the chances of severe volatility. Trading experts are also predicting volatility, as trading volumes for Bitcoin are still in the green, but are declining.

The Moving Average Convergence Divergence (MACD) indicator, however, still shows massive bullish support for bitcoin, with a strong resistance level of $11,200, indicated by the 50-day moving average.

Bitcoin cryptocurrency trading Huobi Crypto Market OKEx btc Bitcoin Futures Bakkt

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