On February 5, a total of $ 1 billion in Bitcoin (BTC) options outstanding interest expires. This number is small compared to last month $ 4 billion options expire, but monthly and quarterly options typically concentrate the most volume.
Friday’s ending is somewhat unusual, although it balances on current BTC levels. Data also shows that bulls have many incentives to raise the price above USD 38,000.
Deribit exchange has 84% market share for Friday’s due date. Analyzing total outstanding interest between $ 28,000 and $ 43,000, $ 300 million in neutral to bullish call options have been stacked against $ 290 million in open interest from put options.
Therefore, by analyzing strikes 25% above or below the current BTC price, there is near balance on both sides.
According to the data above, the neutral to bearish put options are concentrated at USD 34,000 and below. Between $ 34,000 and $ 36,000 strikes, there is a perfect balance as both call and put options are equal.
Despite the discrepancy of less than USD 32,000, the incentive to push the price down creates an imbalance of 3,400 BTC contracts. That translates to an outstanding interest of $ 109 million for a price move of 13% or more. While nominally significant, it does not seem to be enough to create the incentives necessary to surprise the bulls.
On the other hand, if bulls want to increase the price to $ 38,000, it would result in an imbalance of 2,800 BTC contracts. This situation equates to an open interest of $ 106 million for a positive price movement of 4%, so better risk reward for such an effort.
To assess whether market makers and arbitrage desks are pricing risk up or down, the 30% to 20% delta skew is the most useful indicator. It measures the premium difference between the neutral-to-bullish call options stacked against comparable put options.
Numbers between 0 and 15 are considered neutral, while a negative delta skew indicates that large options traders charge an extra premium to take downside risks, and are therefore considered bearish.
The last time such a situation occurred was on December 29, and for the past five days the indicator was at 10. This data shows a perfect balance of risks, meaning there is no incentive for market makers and arbitrage desks to pressure BTC both ways as the due date approaches February 5.
OKEx, Bit.com and Deribit weekly contracts expire on February 5 at 8:00 am (UTC).
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