Short positions dominate as $930 million in bitcoin options expire Friday

Derivatives data on bitcoin options suggest that shorts may have the upper hand when $930 million in options expire tomorrow.

On May 21 at 8:00 a.m. UTC, $930 million worth of bitcoin periodic rights will expire. As usual, Deribit has a 90% share, but the recent market drop may have given the shorts too much power.

As traders and analysts search for reasons to justify the 53% drop from the all-time high of $64,900, ExoAlpha CIO David Lifchitz described the recent market conditions perfectly, saying.

“After the irrational bull market, junk-coin mania and other antics of the past few months, this looks like the final sprint.”
The correction is so strong that even fervent defenders of bitcoin have begun to fall back on the market, including the global chief investment officer of investment giant Guggenheim, who has called the cryptocurrency market “tulip mania.

Whatever the reason behind the price action, traders who held the cheap rights to sell bitcoin at $45,000 or $46,000 before are now celebrating.

Short positions dominate as 0 million in bitcoin options expire Friday

May 21 Cumulative Bitcoin Cycle Rights Source: Bybt

Don’t be fooled by what appears to be a “balanced” situation

While there currently appears to be a balance between call (buy) options and put (sell) options, the 30% decline in bitcoin over the past two weeks has tilted that balance to the short side.

Of the 11,872 call options, only 15% have a strike price of $44,000 or less. That means the remaining 85% became worthless as there are less than 14 hours left until the weekly expiration date. Thus, the 1,850 neutral-to-call calls below $44,500 represent an open position of $75 million.

On the other hand, 88% of the put options have a strike price of $36,000 or higher. These options allow their buyers to sell bitcoin at a fixed price, so they are most commonly used in neutral to bearish strategies.

The short side of the equation may become apparent next week

Unlike futures contracts, there is not much to be gained by extending a losing position into next week. The right to buy bitcoin at $50,000 now is effectively worthless as the expiration date nears. That’s where the short side’s current advantage may continue to exert pressure.

All told, there are $400 million in open interest in puts at $36,000 and higher. The $325 million difference in favor of more neutral to puts is a nice advantage as we approach expiration on Friday.

However, it is important to stress that monthly options usually handle the bulk of the trades and May 28 was no exception with $1.95 billion in open positions. While it may seem too early to draw conclusions, the shorts may continue to put pressure on the market considering that there are almost no calls at $38,000 or lower next week.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/short-positions-dominate-as-930-million-in-bitcoin-options-expire-friday/
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