The recent consolidation of Ether (ETH) around $3,500 has greatly reduced the market’s anticipation of a monthly options expiry above $4,000. Initially, bulls were optimistic due to the potential approval of a spot Ethereum exchange-traded fund (ETF) by regulators, resulting in a 23% gain on May 20. However, since then, the price of Ether has failed to sustain levels above $3,600.
Deribit, the leading exchange, has $3.5 billion in monthly ETH options set to expire on June 28, followed by $286 million at OKX, and $142 million at Binance. However, the likelihood of bullish bets surpassing $4,000 remains low as the United States Securities and Exchange Commission (SEC) continues to review the S-1 filings from ETF providers.
Ether bulls did not anticipate the delay between the regulatory approval of the spot ETF and its actual trading commencement, as confirmed by SEC Chair Gary Gensler. The exact timing of the ETF’s approval remains uncertain within the next three months, which has resulted in a lack of momentum and a decrease in optimistic bets for the June 28 options expiry.
On the other hand, Ether bears were surprised when the SEC concluded its investigation into whether Ether could be classified as a security on June 19. This decision, stated in a letter to Consensys, means that Consensys is no longer under scrutiny for potential ETH sales.
The open interest for Deribit’s June 28 monthly options expiry currently stands at $3.5 billion, but the actual outcome is expected to be lower as prices above $4,000 and below $3,000 are seen as unrealistic.
According to the 0.62 put-to-call ratio, there is an imbalance between the $2.2 billion call (buy) open interest and the $1.3 billion put (sell) options. However, if Ether’s price remains around $3,500 at 8:00 am UTC on June 28, only $257 million worth of these put options will be relevant. This is because the right to sell Ether at $3,300 or $3,400 becomes irrelevant if ETH trades above these levels at expiry.
Based on the current price trends, there are four most likely scenarios for the June 28 options expiry. The availability of options contracts for calls and puts varies depending on the settlement price. The potential gains for each side are as follows:
– Between $3,200 and $3,400: There are 13,000 calls versus 97,200 puts, favoring put options by $280 million.
– Between $3,400 and $3,600: There are 43,900 calls versus 41,600 puts, resulting in a balanced outcome between call and put options.
– Between $3,600 and $3,800: There are 104,200 calls versus 24,400 puts, favoring call options by $300 million.
– Between $3,800 and $3,900: There are 141,600 calls versus 9,600 puts, increasing the advantage for call options to $500 million.
This calculation assumes that call options are primarily used for bullish bets and put options for neutral-to-bearish positions. However, more complex investment strategies are not taken into account.
Unless there is an unexpected approval of a spot ETF before June 28, it is likely that the outcome will be balanced around $3,500. This should be seen as a victory for the bears, especially considering that Ether was trading above $3,800 just two weeks ago.
Please note that this article does not provide investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research before making decisions.