Bitcoin (BTC) and Ethereum (ETH) have been showing relatively modest positive trends over the past 24 hours, while the prices of the two largest cryptocurrencies continue to trade well below levels that would cause “maximum pain” for buyers of August futures contracts.

Deribit, the world’s largest cryptocurrency options exchange by volume, will settle and close 72,000 BTC ($1.9 billion) worth of Bitcoin options contracts and 535,000 ETH ($893 million) worth of Ethereum options contracts on August 25. The maximum pain price for BTC and ETH options is currently $28,000 and $1,800, respectively.

The basic theory of options trading is to push the spot price of the underlying asset to the maximum pain level for a call or put option to maximize the pain of the other party’s options investor. Cryptocurrencies are traded in these spot/futures markets by buying and selling cryptocurrencies.

Therefore, assuming other factors that could affect the market remain unchanged, BTC and ETH may trade around these maximum pain points in the next 24 hours. The maximum pain points will be invalid after the contract expires. The options contract on Deribit will expire at 11:00 AM UTC on August 25. One Bitcoin options contract represents 1 BTC, while one Ethereum options contract represents 1 ETH. The options exchange controls about 90% of the world's cryptocurrency options activity, occupying an important position.

Put option buyers will be net winners at expiration

“Put option buyers will be net winners at expiration,” Lin Chen, head of business development for Asia at Deribit, told CoinDesk. He added that “a large number of put options have been converted to cash.” Cash-settled options are options with a strike price higher than the market price of the underlying asset. This means that put option holders can sell the underlying asset at a price higher than the current market price.

A put option gives the holder the right, but not the obligation, to sell the underlying asset at a predetermined price at a later date. On the other hand, a call option gives the holder the right to buy.