Bitcoin Bulls Look To Profit From $ 195 Million BTC Options Expiration On Friday

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Over the past ten days, the price of Bitcoin (BTC) has tested the resistance of $ 44,500 several times, which marked a 16% drop from the local high of $ 53,000 the week before. Even the $ 3.4 billion long futures contract closeouts that took place on Sept. 7 as BTC fell 18.7% were not enough to dampen the bulls’ optimism, according to data from the bulls. options markets.

Bitcoin price on Coinbase in USD. Source: TradingView

While historical data plays a role in the price of Bitcoin, September has performed negatively in four of the previous five years, and BTC ended August at $ 47,110.

Whatever the price, adoption by institutional investors is growing at a steady pace. On September 13, Morgan Stanley, one of the largest banks in the United States, appointed a senior cryptocurrency analyst for its dedicated cryptocurrency research team.

But the most important positive trigger for a bull run of 50% or more comes from a potential approval of exchange-traded funds (ETFs) by the United States Securities and Exchange Commission (SEC). Fidelity Digital Assets, an investment arm of the global $ 4.2 trillion fund manager, held a private meeting on September 8 with several SEC officials to discuss the benefits and risks of a Bitcoin tradable product.

Fidelity filed a Bitcoin ETP called Wise Origin Bitcoin Trust in March 2021, but the regulator continues to dither to make its final decision. In addition, more than 20 similar applications from other companies have been filed since and none have yet been filed; analyzed by the SEC.

Bitcoin options accumulate open interest for September 3. Source: Bybt.com

The September 17 expiration will be a test of strength for the bears, as 88% of the $ 310 million puts (puts) were placed at $ 47,000 or less. Therefore, if BTC trades above this price on September 17th, the open interest of the neutral to bearish put is reduced to a paltry $ 36 million.

A put option is a right to sell Bitcoin at a predetermined price on the set expiration date. So a put option of $ 45,000 becomes worthless if BTC trades above that price at 8:00 UTC on September 17th.

The apparent advantage of bulls is misleading

A wider view also gives the bulls some edge, as the total open interest of the call (call) options instrument stands at $ 500 million, a 62% lead depending on the call ratio. -to-put.

However, this data is misleading as excessive bulls’ optimism could wipe out most of their bets. For example, if Bitcoin’s expiration price is less than $ 47,000, their open interest is reduced to $ 34 million. After all, what’s the point of a right to acquire Bitcoin at $ 52,000 if it is trading below that price?

Below are the four most likely scenarios that take into account current price levels. The imbalance in favor of each side represents the potential profit from the expiration. The data below shows how many contracts will be available on Friday, based on the expiration price.

Between $ 45,000 and $ 46,000: 240 calls against 1,980 puts. The net result is $ 78 million in favor of protective put (bear) instruments. Between $ 46,000 and $ 48,000: The net result is balanced between bearish and bullish. Between $ 48,000 and $ 50,000: 3,500 calls against 620 puts. The net result is 143 million dollars in favor of call options (bull). Above $ 50,000: 4,150 calls against 260 puts. The net result is a complete dominance of $ 195 million of bullish instruments.

This rough estimate considers call (call) options exclusively used in bullish strategies and put (put) options in neutral to bearish trades. Unfortunately, real life is not that simple as it is possible that more complex investment strategies have been deployed.

Incentives are in place for bulls to attempt to break $ 50,000

Buyers and sellers will show their strength in the hours leading up to Friday’s expiration, and the bears will try to minimize the damage by keeping the price below $ 48,000. On the other hand, the bulls have decent control over the situation if BTC stays above such a level.

The highest stress level for bears is $ 50,000, where the bulls have a strong incentive to dominate the weekly expiration and land a decent advantage of $ 195 million.

There is still room for further volatility before Friday, and the bulls appear to be better positioned.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trade move involves risk. You should do your own research before making a decision.

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