The Crypto Options Trade Wall Street Won't Tell You About (2:17)

Bitcoin (BTC) options worth approximately $16 billion on the crypto derivatives exchange Deribit will expire on Friday, Sep. 25, at 8:00 UTC.

According to Deribit CEO Luuk Strijers, Bitcoin’s maximum pain sits at $75,000.

Bitcoin options expiry on Sep. 25

A total of 185,908 Bitcoin options—110,747 call and 75,160 put contracts—worth $16 billion in notional value will expire this Friday, Strijers revealed.

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How Bitcoin options trade and expire

An option is a contract that gives a trader the right, but not the obligation, to buy or sell Bitcoin at a predetermined price called the strike price.

While the call option gives traders the right to buy BTC at the strike price, the put option gives them the right to sell BTC at the strike price.

Here is how it works.

Suppose a trader has a call option with a strike price of $80,000 and an upfront premium of $2,000, which will expire on Sep. 25.

If BTC trades at $90,000 on Friday, the trader can buy it for $80,000. While one BTC would cost everyone $80,000, the options trader would spend only $82,000 for it.

But what if BTC trades at $70,000 on Friday? The options trader can skip the contract and instead buy at the market price. While everyone else would pay $70,000 for one BTC that day, the options trader would end up spending $72,000 for it. In such a scenario, the option would expire.

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Friday options expiry could spark Bitcoin volatility

Bitcoin traders are extremely attentive to options expiry, especially when the figure is billions of dollars on a single day.

The open interest reveals how many contracts are still outstanding. The put/call ratio tells whether traders are bullish or bearish on Bitcoin.

One crucial metric to watch out for is the “max pain” which tells you the price point at which option traders collectively experience the most losses. Currently, the figure stands at $75,000.

The Friday expiry of Bitcoin options on Deribit worth $16 billion is expected to spark market volatility as market movers and other traders could reposition their holdings.

Note that the $16 billion figure is a notional value. It represents the value of Bitcoin contracts that are expiring this Friday. No money is changing hands. 

The put-to-call ratio of 0.68 means more calls than puts. It suggests bullish sentiment among Bitcoin options traders.

Bitcoin was exchanging hands at $83,838 at the time of writing, as per Decibel.

Related: Tesla gains $122M on Bitcoin without buying a single coin

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