After the expiration of the BTC option on Friday, the Bitcoin bulls will receive a profit of $830 million


Two or three weeks ago, when Bitcoin (Bitcoin) Is trading below $52,000, so traders who bet $65,000 before October 22 will be considered very optimistic. The fact that 98% of the put (sell) options of Bitcoin weekly options expiring this Friday are below this price proves to be true.

Fast forward to this week, the first BTC went online successfully Exchange Traded Fund (ETF) In the United States, it is reported that Digital Currency Group (DCG), the parent company of Grayscale Bitcoin Trust, has increased the acquisition limit GBTC worth up to 1 billion U.S. dollars Stocks, pushing the price of Bitcoin to a record high.

This US$40.5 billion investment tool has been trading in the US market since March 2015, and recently it submitted a request to the US Securities and Exchange Commission (SEC) to convert its GBTC products into ETFs.

Bitcoin price (in U.S. dollars) on Coinbase. Source: TradingView

The parabolic movement that hit an all-time high of $67,000 on October 20 was also driven by the following factors: Billionaire investor Carl Icahn’s Bullish remarks. With four years of brilliant returns, Icahn warned of the impending financial crisis and emphasized the strength of Bitcoin as an inflation hedge.

In addition, according to reports, Russian Deputy Minister of Industry and Trade Vasiliy Shpak (Vasiliy Shpak) submitted a proposal to use the country’s oil exploration and natural gas production to generate electricity. Cryptocurrency miningThe Russian government tried to reduce natural gas combustion to reduce emissions, but it was difficult to achieve the goal due to underdeveloped infrastructure.

Although this Friday’s $1.8 billion option expiration was an overwhelming victory for the bulls, it was not the case a few weeks ago.

Bitcoin Options aggregates open positions on October 15. Source: Bybt

At first glance, the $1 billion call (buy) options that expire on October 22 account for only 23% of the $810 million put (sell) options.

However, the 1.23 put option ratio is deceptive, because if the price of Bitcoin stays above $64,000 at 8:00 AM UTC on Friday, the recent rally may eliminate most of the bearish bets. If the transaction price of Bitcoin is higher than that price, the right to sell Bitcoin for $60,000 has no value.

Longs above $65,000 seem comfortable

Here are the four most likely scenarios for expiration on October 15. The imbalance in favor of either side represents theoretical profit. In other words, depending on the expiration price, the number of active call (buy) and put (sell) contracts will be different:

  • Between US$60,000 and US$62,000: 8,670 call options and 3,070 put options. The net result is $335 million in favor of bullish (bull market) instruments.
  • Between USD 62,000 and USD 64,000: 10,780 call options and 2,100 put options. The net result is $540 million in favor of bullish (bull market) instruments.
  • Between USD 64,000 and USD 66,000: 13,050 call options and 280 put options. The net result is $830 million in favor of bullish (bull market) instruments.
  • More than $68,000: 13,680 call options and 20 put options. The end result is full dominance, and the bulls made a profit of US$940 million.

This rough estimate takes into account that call options are used for call bets, while put options are only used for neutral to put transactions. However, this over-simplification ignores more complex investment strategies.

For example, a trader could have sold put options, effectively gaining positive exposure to bitcoin above a certain price. Unfortunately, there is no easy way to estimate this impact.

Short positions require a 7% price adjustment to reduce losses

In each case drawn above, the bulls have absolute control over the expiry date of this Friday. The good news this week gives investors no reason to profit or accept price adjustments before maturity. On the other hand, short positions need to fall below US$62,000 by 7% to avoid a loss of US$830 million.

Traders must consider that during a bull market, the effort required by sellers to put pressure on prices is enormous and often ineffective. Currently, options market data shows that call (buy) options have a considerable advantage, which provides more call bets for the monthly expiration date on October 29.

The views and opinions expressed here only represent author It does not necessarily reflect the views of Cointelegraph. Every investment and transaction involves risks. When making a decision, you should conduct your own research.