Bitcoin bulls target $40K as Friday’s $1B BTC options expiry approaches

Bitcoin bulls target $40K as Friday’s $1B BTC options expiry approaches

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Bitcoin (BTC) options with open interest totaling $1 billion expire on the 5th. February. This number is small compared to the $4 billion in option expiries last month, but monthly and quarterly options typically concentrate the largest volume.

Friday’s expiration is a bit unusual, but balanced at current BTC levels. The data also shows that it is in the bulls’ best interest to push the price above $38,000.

BTC Feb 5 open interest global options. Source: Deribit, OKEX, Bit.com.

Bitcoin bulls target $40K as Friday’s $1B BTC options expiry approaches

The share of debate in the Friday market is 84%. If we analyze the total open interest from $28,000 to $43,000, there are 300 million growth neutral calls stacked against 290 million open puts stacked.

So if we analyze strikes at 25% above or below the current BTC price, we get a rough balance on both sides.

Based on the above data, the bearish neutral put option is concentrated at $34,000 and below. Between $34,000 and $36,000 is the ideal balance, as the calls and puts are worth the same amount.

Despite the divergence below $32,000, the downside stimulus is an imbalance of 3,400 BTC contracts. This means that an open interest of $109 million would correspond to a negative price movement of 13% or more. While nominally significant, it does not appear to be enough to provide the necessary incentive to throw bulls off balance.

On the other hand, if the bulls want to push the price up to $38,000, the BTC contract would be out of balance by 2,800. This equates to an open interest of $106 million at a positive price swing of 4%, which is quite risky for such efforts.

To assess how market makers and arbitration committees view upside or downside risk, the most useful measure is a downside slope of 30-20%. It measures the premium difference between neutral and UK calls stacked with similar puts.

Derivative BTC options with delta ramps from 30% to 20%. Source : genesisvolatility.io

Bitcoin bulls target $40K as Friday’s $1B BTC options expiry approaches

Numbers between 0 and 15 are considered neutral, while a negative skew delta indicates that large options traders are charging an extra premium to take the downside risk and is therefore considered bearish.

The last time this happened was on December 29, and for the past five days the indicator has remained at 10. This data shows perfect risk equilibrium, meaning that market makers and arbitrage committees have no incentive to push BTC, given the 5’s expiration date. February is approaching.

The weekly contracts of OKEx, Bit.com and Deribit expire on February 5 at 8:00 a.m. (UTC).

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Cointelegraph. Every investment and every stage of trading involves risk. You should do your own research before making a decision.

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