USD 450 million in Bitcoin futures expire this Friday and data shows that bullish professional traders are prepared to defend the USD 13,000 level.
A total of 62,000 Bitcoin Options (BTC) will expire this Friday, and that’s $830 million in open interest. These large numbers don’t reflect the fact that 58% of these options are no longer worth anything.
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As we approach the expiration date, call options above the current level begin to devalue very quickly. It’s not worth paying $20 for the opportunity to buy Bitcoin at $14,500 on Friday morning. Therefore, renewing the options for next month isn’t very useful.
Price of BTC options for the month of October Source: Deribit
With less than 48 hours to go until October’s expiration, call options of $14,500 and above are unlikely. The same can be said of put options of USD 11,500 that are currently trading at below USD 10 each.
Deribit leads the options market with a 70% share of the options that still have value. Currently, there are USD 134 million in call options from USD 11,500 to USD 13,500, accumulated against USD 45.5 million in put options from USD 12,5000 to USD 14,500.
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The Chicago Mercantile Exchange (CME) has a 26% market share among BTC options for October that still have value. Call options close to the current market level amount to USD 72 million, while put options are less than USD 1 million. This movement is no different from the maturities seen in the past, as CME option traders are usually extremely bullish.
Therefore, there is currently a $160 million imbalance that favors the bulls in the Bitcoin options markets. This is a relevant number considering that the expiration occurs at a set time. OKEx and Deribit options and futures will expire at 8:00 a.m. (UTC) on October 30th, and the WEC a few hours later at 4:00 p.m. (UTC).
Open futures interest generally falls near maturity
Many traders believe that the $5.4 billion open interest in Bitcoin futures also expires on Friday. Most of those contracts are either perpetual (reverse swaps) or are set for a later date.
This time around, CME is leading with an open interest of $360 million for the month of October, but there is one detail. This notional will be drastically reduced before maturity as traders move their positions for the next few months. As evidence of this movement, the remaining open CME interest for October was reduced yesterday by USD 130 million.
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No matter how large an investor’s profit or loss, it is viable to renew the position for the next maturity. Unlike the option markets, futures contracts are not devalued near their last trading day.
The futures margin is adjusted daily, which means that the seller (short) pays the buyer (long) of the contract when Bitcoin trades above the price, and the opposite happens if the BTC price closes below. Both parties can benefit from renewing their positions, as long as there is sufficient margin to maintain it.
For professional traders, the futures premium is the most useful indicator to measure how bullish or bearish those investors are. At the time of writing, OKEx leads the remaining trades with $69 million due Friday, followed by $23 million Huobi.
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This indicator is known as the base and usually ranges from 5% to 15% annualized rate. Whenever the premium is positive, the market is characterized by being in contango. While levels below 5% indicate a modest downward trend.