In the last 24 hours, Bitcoin (BTCThe price declined 10% today to test the USD 30,000 support. This drop below what traders have described as an ‘important’ support occurred just two days before this month’s futures and options expire.
In spite of the the record-high expiration of $ 4 billion options is just two days away, both bull and bear silk traded similar sizes today.
Unlike futures contracts, options are divided into two segments. Call (buy) options allow the buyer to acquire BTC at a fixed price on the expiration date. On the other hand, the seller of the instrument is obliged to make the BTC sale. They are generally used for neutral arbitrage trades or bullish strategies.
The put (sell) options are often used as a hedge, protection against negative price movements.
To understand how these competing forces balance, one must compare the size of the calls and put options for each strike price. Options markets are all-or-nothing, meaning they either have value or become worthless if they trade above the strike price of the call, or the opposite for put option holders.
Trading volume over the past 24 hours has favored the more bullish call options by 51%. Nonetheless, this number has been tainted by the ultra bullish strikes that cost $ 37,000 and more. Since there are less than 36 hours to maturity, these contracts are trading below $ 50 each.
Excluding these overly optimistic strikes, today’s trading added another $ 95 million in call options to outstanding interest below $ 35,000. On the other hand, the more bearish put options for $ 27,000 and above are $ 90 million in outstanding interest.
The outcome of today’s activity was neutral before options expire on Friday. Nevertheless, the overall open interest imbalance must be monitored separately from the current movement.
By excluding put options below $ 27,000 and call options above $ 35,000, it is easier to estimate the potential impact of Friday’s expiration. Incentives to pump or dump the price by more than 16% become less likely, as the potential benefits will rarely exceed costs.
This data leaves $ 582 million in call options up to $ 35,000 for the total options expiring on January 29. Meanwhile, the more bearish put options up to $ 27,000 amount to $ 422 million. Hence, there is a $ 160 million imbalance favoring the more bullish call options.
Given the volumes traded in the past 24 hours and the open interest of put options, there isn’t much of a profit for bears to push BTC below $ 29,000, at least from an options market standpoint.
The views and opinions expressed here are solely those of the author and do not necessarily reflect Cointelegraph’s opinion. Every investment and every trade move carries risks. You should do your own research when making a decision.