On June 25, Ether (ETH) will face its largest option expiration in 2021, as $ 1.5 billion worth of open interest will be settled. This figure is 30% higher than the expiration on March 26, which occurred when the price of Ether plunged 17% in 5 days and bottomed out near $ 1,550.
However, Ether rallied 56% after the March options expired, reaching $ 2,500 in three weeks. These movements had no correlation with those of Bitcoin (BTC). Therefore, it is essential to understand whether a similar market structure could be in place for the options and futures expiration on June 25.
Recent history shows a mix of bullish and bearish catalysts
On March 11, the Ether miners staged a “show of force” against EIP-1559, which would significantly reduce their revenue.
The situation worsened on March 22, when CoinMetrics released an “Ethereum Gas Report,” stating that the highly anticipated EIP-1559 network upgrade would likely not solve the high gas concentration issue.
Things started to change on March 29, when Visa announced plans to use the Ethereum blockchain to settle a transaction made in fiat, and on April 15, the Berlin update was successfully implemented. According to Cointelegraph, after the Berlin launch, “the average gas tariff began to decline to more manageable levels.”
Before jumping to conclusions and speculating whether these phenomena of the Ether price bottoming out near the expiration of the $ 1.5 billion options are bullish or bearish, it is best to first analyze how the big traders position themselves.
Notice how the June expiration has more than 638,000 ETH option contracts, totaling 45% of the aggregate open interest of $ 3.4 billion.
Unlike futures contracts, options are divided into two segments. Call options allow the buyer to purchase Ether at a fixed price on the expiration date. Generally speaking, they are used in neutral arbitrage trading or bullish strategies.
Meanwhile, put options are commonly used to hedge or protect against negative price movements.
For bulls, $ 2,200 is the line in the sand
As shown above, there are a disproportionate number of call options of $ 2,200 and more strikes. This means that if the price of Ether on June 25 is below this level, 73% of the neutral to bullish options will be worthless. The 95,000 call options still in play would represent an open interest of $ 228 million.
On the other hand, most protective put options have been opened at $ 2,100 or less. Consequently, 74% of those bear-neutral options will lose their value if the price remains above this level. Therefore, the remaining 73,700 put options would represent an open interest of $ 177 million.
It seems premature to determine who could be the winner of this race, but considering Ether’s current $ 2,400 price, it seems both sides are reasonably comfortable.
However, traders should be on the lookout for this event, especially considering the impact on prices surrounding the March expiration.
The views and opinions expressed here are solely those of the Author and do not necessarily reflect the views of Cointelegraph. Every investment and trade movement involves risk. You should do your own research when making a decision.