Over $6.51 billion worth of Bitcoin and Ethereum options are scheduled to expire on November 24, indicating that trading activity is likely to pick up.
A number of Bitcoin (BTC) and Ethereum (ETH) options are scheduled to expire on November 24, which could potentially impact market dynamics. This follows the US DOJ’s recent criminal charges against Binance and a hefty $4.3 billion fine.
In particular, approximately 108,000 BTC options are approaching expiration. The put-call ratio for these options is 0.83, indicating a slightly higher propensity for call options (betting on price increases) than puts (betting on prices falling).
The ‘biggest problem’ for these options is $33,000, which is the price level at which the collective holders of the option contract will experience the greatest financial loss. The total notional value of these BTC options is a whopping $4.04 billion.
At the same time, approximately 1.2 million ETH options are also set to expire. The put-call ratio is 0.71, leaning more towards calls. The biggest problem with these ETH options is set at $1,700, with a notional value of $2.47 billion.
In options trading, it is important to understand the concept of ‘maximum pain’. The total value of options (both calls and puts) expiring on a specific date represents the price level that would result in maximum financial loss to the option holder. This concept is often used by traders to evaluate potential market movements with options close to their expiration date.
What does it mean?
When a BTC option is set to expire, it means that a contract has arrived that gives the holder the right, but not the obligation, to buy or sell Bitcoin at a predetermined price (strike price) by a specified date (expiration date). The validity period expires.
You must exercise these options on their expiration date or they become worthless. If the market price of Bitcoin is favorable compared to the exercise price, the option holder can exercise the option to purchase Bitcoin at this lower price. Conversely, if the market price is lower than the put option’s strike price, the holder can exercise the option to sell Bitcoin at a higher strike price.
The impending expiration of these options can result in increased trading activity and unpredictable price movements in the market. Traders and investors are closely monitoring these developments, especially in light of the recent legal action against Binance, which has already injected significant volatility into the market.