As another month draws to a close, it is important to note that the end of the month is generally associated with the expiration of bitcoin derivative products. The futures and options market has noted great interest from traders, with nearly 66,400 BTC options set to set to expire on August 28, according to data provider Skew.

Source: skewSkew

While options haven’t seen much trading action lately, the expiration in question could bring some volatility to the market. The put/call ratio has climbed to 0.71, indicating a bearish market. According to data provided by Ecoinometrics, this means that the put/call ratio is at 7 calls for every 3 puts.

As the contract will expire on Friday, 87% of put options will expire out-of-the-money, a term used to describe a put option with a strike price below the prevailing market price, according to the data provider’s observation. Conversely, 79% of call options are expected to expire out-of-the-money, which means that the strike price of the call option will be above the market price.

In addition, traders using the bull call spread trading strategy may see their contracts expire without any return. The strategy uses two call options to create a range consisting of a floor strike and a ceiling strike, in this case $12,500 and $145,000. While call spreads help limit losses, they can also limit gains. According to Ecoinometrics, there are 2,000 BTC worth of call spreads. However, they will expire worthless because the price of the BTC, at the time of writing, is well below the lower strike price.

Interestingly, the famous BTC options exchange Deribit faced a “hardware problem” as traders prepared for Friday’s big expiration. Deribit has always been the most popular options exchange, and it’s a good thing the outage didn’t happen tomorrow, because otherwise the crypto space would be in an uproar, as most monthly contracts are set to expire on the exchange.

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2020-08-27