Bitcoin Shorts Aim to Hold Bitcoin Below $60,000 Before Friday’s $1.1 Billion Option Expiration

Bitcoin bulls have a $104 million advantage ahead of Friday’s $1.1 billion options expiration, but that depends on the bitcoin closing price reaching $60,000.

The bitcoin price recently fell to support at $53,000 and has now recovered from the decline. That rally back to $57,500 eased negative pressure on the long May 7 3,500 BTC options contracts, which represents $200 million in open positions and $1.1 billion in options expiration.

The news that New Digital Investment Group (NYDIG) has partnered with Fidelity National Information Services (FIS) to create a framework for U.S. banks to offer cryptocurrency trading services may have contributed in part to today’s rapid recovery.

Patrick Sells, head of banking solutions at NYDIG, told CNBC that several banks have already signed on to the program.

In addition, a survey by MasterCard found that 40 percent of the 15,500 respondents intend to use cryptocurrencies for payments in the next 12 months. In addition, it reported that 77% of millennials are interested in learning more about cryptocurrencies.

Regardless of the reasons for Bitcoin’s recent price recovery, longs are now in a much better position when their options expire on May 7.

The Call-to-Put Option Ratio Balance Is Misleading

Accumulated BTC options open interest on May 7 Source: Bybt

Purchasers of options contracts pay in advance and are therefore not exposed to mandatory liquidation risk. On the other hand, call (buy) options offer upside price protection to their buyers, while the opposite is true for put (sell) options.

This means that traders targeting neutral to bearish strategies will often rely on puts. On the other hand, call options are more commonly used for bullish positions.

Analysts can easily overlook the expiration of bitcoin options on Friday, as puts are at the same ratio as buys. This means that the open positions in neutral-to-call and neutral-to-put options are balanced. However, these options will expire in less than 38 hours, causing calls at $65,000 and above to become worthless.

Put options, which are the right to sell bitcoin at $48,000 on Friday, also have no value today. To properly interpret the potential impact of the May 7 expiration, analysts must exclude strikes that are too far removed from the current price.

Longs Own $104 Million at $57,000

There are 4,950 contracts ($285 million) for calls below $60,000, and if the bitcoin price happens to reach $64,000 on May 7, then another 1,620 contracts would add $93 million to the open position in calls.

In addition, puts with strike prices of $54,000 to $60,000 add up to 3,150 contracts. The current open interest in these options is $181 million, and a reduction in the strike price to $50,000 would increase the open interest by 2,800 contracts. That price would add $161 million to the open position in puts.

Although the longs have a $104 million advantage before Friday’s expiration, that number drops significantly at any price below $60,000. As the chart shows, most of the call options (1,680) are located at this price.

Thus, the shorts have an incentive to hold the price down below $60,000. At least until 8:00 a.m. UTC on May 7.

Posted by:CoinYuppie,Reprinted with attribution to:
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