The Aftermath of $1.5B Crypto Options Expiry: What Investors Need to Know

How Will Markets React to the $1.5B Crypto Options Expiry?

On July 5, almost 18,000 contracts with a notional value of $1 billion in Bitcoin options are set to expire. The large end-of-quarter contract expiry last Friday was substantially larger than this week’s expiry event. The put/call ratio of the current batch of Bitcoin derivatives is 0.65, which indicates that nearly twice as many long (call) contracts as short (put) contracts are expiring. Following this week’s severe market drop, the maximum pain point, or level at which the majority of losses will be incurred, is $61,500, which is considerably higher than current spot prices.

Just after the quarterly delivery, the market saw huge volatility, with major term IVs (implied volatility) increasing significantly, a good opportunity for institutional sellers to build positions. The market atmosphere is more pessimistic, and the IV of put options on BTC & ETH has risen significantly, and the term structure shows an inversion of far-low and near-high.

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How is the Crypto Market in General?

With the entire capitalization of cryptocurrencies dropping 8.6% on the day to $2.08 trillion, the markets have collapsed to their lowest points since late February. Glassnode reports that in the last 24 hours, there had been $675 million in liquidations. In the biggest drop since early April, around $350 million has left the cryptocurrency market since the start of this week.

• As Mt. Gox redemption transfers started and the German government kept moving BTC, Bitcoin dropped 2.30%, closing the day below $56,000.
• Even worse, on Friday’s Asian trade, Ethereum saw a sharp decline of 4.07% to $2,970.

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