Bulls favor BTC to $40K as $1 billion options expire on Friday

A total of $1 billion in open interest in Bitcoin options will expire on February 5. This is relatively small compared to the $4 billion in options that expired last month, but options trading volumes are usually highest in the monthly and quarterly periods.

Friday’s expiry was somewhat unusual, although it remained balanced at current BTC price levels. Data also showed that bulls are motivated to push prices above $38,000.

BTC options cumulative open interest on February 5 Source: Deribit, OKEx, Bit.com

The Derbit exchange holds 84% ​​of the market share for Friday’s expiration. Analyzing the total open interest between $28,000 and $43,000, it can be seen that there is an overlap of $300 million worth of neutral to bullish call options and $290 million worth of put options open interest.

Based on the above data, neutral to bearish options are concentrated at and below $34,000. Between the $34,000 and $36,000 strike prices, there is a perfect balance as there are equal proportions of calls and puts.

There is a discrepancy below $32,000 and there is still an incentive to push the price down, with more puts than calls at 3,400 BTC. That is, if the price drops by 13% or more, the open interest is $109 million. While noteworthy, this does not seem to be enough to catch the bulls off guard.

On the other hand, if bulls want to support the price to $38,000, it will result in 2,800 more BTC in call options than put options. In this case, it is equivalent to $106 million in open interest for a positive price movement of 4%, so the risk reward of this effort is higher.

To assess whether market makers and arbitrageurs are pricing risk up or down, the 30% to 20% delta skew is the most useful indicator. It measures the difference in premium between a neutral, bullish call option and a similar put option.

30% to 20% delta skew for Deribit BTC options. Source: genesisvolatility.io

Numbers between 0 and 15 are considered neutral, while negative delta skew indicates that large options traders are demanding additional premium to take on downside risk and is therefore considered bearish.

The last time this happened was on December 29, and for the past five days, this indicator has remained at 10, showing a perfect balance between risks, meaning that market makers and arbitrageurs have no incentive to put pressure on Bitcoin in any way ahead of the February 5 expiration.

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