$5 billion Bitcoin & ETH options expire today – How will the market react?

Although Bitcoin shows strength in trading in America, traders and investors should prepare for volatility in the early hours of the European session on Friday, as the market welcomes the options contract expiration event.

However, this impact may only occur for a short time, as the market usually adjusts quickly to adapt to the new trading environment shortly thereafter.

Things traders need to know about today's options contract expiration

Data from Deribit shows that more than 5.03 billion dollars in options contracts for Bitcoin and Ethereum (ETH) will expire today. Specifically for Bitcoin, the options contracts nearing expiration have a total notional value of 4.3 billion dollars, with 36,970 open contracts (OI).

The Put-to-Call ratio is currently at 1.06 and the "maximum pain" level for Bitcoin options expiring today is $108,000.

Bitcoin options contract expires | Source: DeribitFor Ethereum options contracts, the notional value of the ETH contracts expiring today is $712.35 million, with 239,926 open contracts.

Similar to Bitcoin, the ETH options contracts that expire today also have a Put-to-Call ratio above 1, with data from Deribit recording 1.11 at the time of writing. Meanwhile, the maximum pain (strike price) is 2,600 dollars.

Options contract ETH expires | Source: DeribitNotably, the value of the options contracts for Bitcoin and ETH expiring today is significantly higher than last week. On July 4, there were nearly 3.6 billion dollars in options contracts expiring, including 27,384 BTC contracts and 237,274 ETH contracts, with notional values of 2.98 billion and 610 million dollars, respectively.

However, the main similarity between the options contracts that expire this week and last week is that they both have a Put-to-Call ratio (PCR) greater than 1.

A PCR ratio greater than 1 indicates that the number of Put ( sold ) is greater than the number of Call ( bought ), which often reflects a bearish sentiment in the market.

The PCR ratio of Bitcoin is 1.06 and that of ETH is 1.11, indicating a balance in bets between buyers and sellers. This balanced outlook arises in the context of investors being uncertain whether the market will decline further or if they are hedging portfolio risks in the event of a sell-off.

High leverage trading activity – Extremely high risk level

Analysts at Greeks.live note that there is currently very little consensus on market trends, as most trading activity revolves around news rather than price analysis. However, they also highlight the state of high leverage trading and extremely high risk acceptance.

"Many traders are discussing positions using 500x leverage – considered "suicidal" at the current price level. Despite the extremely high risk, new positions are still being opened, described as both exciting and daring. Some trading strategies based on 100% signals are also being discussed, showing strong confidence but accompanied by significant risks," Greeks.live shared in a post.

Notably, trading with 500x leverage can drastically amplify both profits and losses. Meanwhile, both Bitcoin and ETH are currently trading well above their respective maximum pain levels.

As of the time of writing, Bitcoin is trading at $118,197 after setting a new all-time high (ATH). Meanwhile, ETH has reached $3,006 after rising nearly 9% in the past 24 hours.

The maximum pain level is an important indicator in crypto options trading. It represents the price level at which most options contracts will expire worthless, causing the largest financial loss – or the greatest "pain" – for the traders holding these contracts.

This concept is important because it often influences market behavior. According to the theory of maximum pain, asset prices tend to move towards the maximum pain price as options contracts near expiration.

When the options contracts expire on Deribit, the price of Bitcoin and ETH may drop close to these levels. However, that does not mean that BTC will necessarily drop to 108,000 dollars or ETH to 2,600 dollars.

The market often stabilizes quickly after traders adapt to the new price environment. With a large volume of options contracts expiring today, traders and investors can expect a similar scenario, with the potential to influence market trends by the end of the week.

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