2.5 Billion Bitcoin Options Expire Friday Short Positions Dominate

If bitcoin fails to hold $32,000 by June 25, the shorts are likely to be ahead by $450 million.

Bitcoin (BTC) prices have fallen roughly 22% in the past seven days, retesting the $31,700 area for the second time in June. According to some analysts, the most pressing news contributing to the negative performance is that China is reportedly cracking down on bank accounts traded over-the-counter.

However, bitcoin’s counting power, which fell nearly 50% to an eight-month low, may also have played a significant role in the price correction, according to Cointelegraph. Even MicroStrategy’s recent $489 million acquisition was not enough to sustain the $35,000 support.

This move raises the suspicion that June 25 options and futures expiration may also be behind this move. After all, there is the potential to settle $2.5 billion worth of options and another $2 billion worth of futures contracts this month.

CME futures currently account for nearly half of open futures contracts, although historically, most investors turn their positions around on the last week of trading.

Market makers and arbitrage teams tend to hold short futures positions while holding bitcoin, thus profiting from the premium in the regular spot trading market. Meanwhile, large asset management firms, such as Tudor Investments, hold bullish futures exposures.

However, there is no benefit to rolling an option contract that is already worthless. With less than five days to expiration, the right to buy bitcoin (calls) for $44,000 is trading at $20.


Bitcoin Options Accumulated Open Positions on June 25 Source: Bybt

The initial picture favors the bulls as there are 36% more neutral-to-call call (buy) option contracts expiring on June 25.

Notice that 87% of the call options have been placed above $34,000. Therefore, if Bitcoin stays below this level, only $200 million worth of these neutral-to-call contracts will be open at expiration in June.

Meanwhile, 46% of the protected puts above $34,000 will be exercised. That means $510 million in open positions, giving those neutral-to-call contracts a significant advantage.

If Bitcoin goes above $36,000 on June 25, the $310 million spread in favor of the shorts will be reduced by $190 million. On the other hand, shorts could add another $140 million to their open positions by pushing the price below $32,000. The potential $450 million advantage is huge and should not be ignored.

It might be wise for the long side to admit defeat and lick their wounds, and it might make sense to use the front-end spread on the puts to establish a new position that allows for gains without upfront costs in addition to margin.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/2-5-billion-bitcoin-options-expire-friday-short-positions-dominate/
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