A total amount of $450 million in Bitcoin futures will expire today, and data shows bullish pro traders will defend the new $13K level. Exactly 62K Bitcoin (BTC) options will expire today - an equivalent to $830 million in open interest. Despite these massive data, it’s good to know that 58% of these options are now deemed worthless.
Each time the expiry date approaches, the call (buy) options above the current level begin to depreciate very fast. Take the advice that it’s not worth paying $20 for the opportunity to buy BTC at $14.5K on Friday morning. So, rolling options to the next month is not that helpful.
October BTC options pricing. Source: Deribit
Two days before October's expiry, call (buy) options above $14.5K and above face slim odds. The same situation is with the $11.5K put (sell) options, which are currently trading below $10 apiece. According to Deribit data, the bulls favor bears by a ratio of 3:1. Now there are $134 million worth of call (buy) options ($11.5K to $13.5K), stacked against $45.5 million input (sell) options ($12.5K to $14.5K).
There's currently a $160 million imbalance favoring bulls on BTC option markets, and the expiry happens at a particular set time. OKEx and Deribit, both options and futures, are set to expire at 8:00 AM (UTC) on October 30, while the CME will expirers later at 4:00 PM (UTC). Also, traders believe that Bitcoin futures $5.4 billion open interest will expire on Friday.
For the October expiry, CME leads with $360 million open interest. Of course, the amount drastically reduces ahead of expiry. The CME outstanding October's open interest got cut by $130 million just two days ago. When Bitcoin trades up, the contract buyer (long) gets paid by the seller (short), and the opposite happens if the BTC price closes down. As you can see, both sides have the chance to benefit from rolling over their positions, as long as there is enough margin to maintain it. Professional traders use futures premium indicators to gauge how bullish or bearish those investors are.
This indicator is usually ranging between a 5% to 15% annualized rate. The positive premium characterizes the market as being in contango, while the levels below 5% indicate modest bearishness. Negative future contracts premium, though unusual, indicates the liquidity issues.
Bitcoin 1-month futures annualized premium. Source: Skew
According to the chart above, investors were very bullish in August, as the 1-month futures contract traded with a 25% or higher premium. Then 30% Bitcoin hiked from $9.1K to $11.9K. The BTC futures open interest doubled to $5.4 billion compared to April, and now investors are prepared to defend the current $13K support level. Meanwhile, futures contract buyers are holding a comfortable position.
Bitcoin futures aggregate open interest. Source: Skew
The moment Bitcoin spiked from $11.3K fourteen days ago, short-sellers saw the consequences in their balances decrease every day. Volatility is the usual scenario on this October expiry, and the bears won’t have a chance to re-establish control of the markets.