Buyers of BTC and ETH put options are clear winners heading into the expiry, said Deribit’s Asia business development personnel Lin Chen. Bitcoin (BTC) and Ether (ETH) have seen moderate gains in the past 24 hours, but prices remain below levels that could cause maximum pain for buyers of August expiry option contracts. On Friday, Deribit, the world’s leading crypto options exchange, will settle 72,000 BTC August options contracts worth $1.9 billion and 535,000 ETH options contracts valued at $893 million. The max pain levels for BTC and ETH settlements are currently at $28,000 and $1,800.
The popular theory is that writers or sellers of call options and put options often look to push the underlying asset’s spot price toward the max pain level to make their counterparties, the options buyers, suffer the most. This is done by buying/selling the cryptocurrency in the spot/futures markets.
An in-the-money put is the one with a strike price higher than the going market rate of the underlying asset. It means the ITM put holder can sell the underlying asset at a price greater than the current market rate. Most ether call options are set to expire out-of-the-money, thanks to last week’s 8.3% slide. Bitcoin’s open interest distribution paints a similar picture, as the feature image shows. The leading cryptocurrency by market value tanked over 10% last week, its biggest slide since the collapse of FTX in November.