Bitcoin Options Worth $9.25 Billion Set to Expire on June 28
On the morning of June 28, a total of $9.25 billion in Bitcoin options is set to expire. This monthly expiry is significant as it not only marks the end of the first half of 2024, but it also historically represents the second-largest expiry across all markets, including traditional finance.
Investors are particularly concerned following the 12% decline in tech giant Nvidia’s stock since reaching its all-time high on June 20, which amounts to a loss of $3 trillion.
The recent downward pressure on Bitcoin has given bears an advantage of potentially $430 million. This can be attributed to the market’s weakness over the past two weeks, rendering call (buy) options with a strike price of $70,000 or higher essentially worthless. If Bitcoin (BTC) remains near $61,500 on June 28 at 8:00 am UTC, the options to buy BTC at $62,000 and $64,000 will not participate in the expiry. Similarly, put (sell) options at $58,000 and $60,000 will become null.
Bitcoin bulls have macroeconomic data on their side, as it favors a more aggressive rate cut and monetary stimulus campaigns from the United States Federal Reserve and Department of Treasury. In May, sales of new U.S. single-family homes dropped to a six-month low, down 11.3% from the previous year. Additionally, the current sales pace indicates that it would take 9.3 months to clear the new houses supply, up from 8.1 months in April.
A report from Charles Schwab on June 24 highlighted that the current dynamics in the finance market resemble those of 2021, potentially signaling a bear market ahead. The analysts point to a growing divergence between the S&P 500 and equally weighted indexes, with artificial intelligence stocks leading the way. While they believe there is no immediate risk for the bull market, they advise that more members need to join the party to sustain the current market conditions.
Currently, Deribit holds the top position in the June BTC options market, with an open interest of $6.65 billion. The Chicago Mercantile Exchange (CME) follows with a $1.15 billion open interest, while OKX and Binance have $735 million and $520 million, respectively. Overall, the total call and put BTC options for June 28 amount to $9.25 billion, a considerable sum that is inflated by excessively bullish call options.
The put-to-call ratio of 0.51 indicates an imbalance between the $4.4 billion call open interest and the $2.25 billion put options. However, if Bitcoin’s price remains below $65,000 at 8:00 am UTC on June 28, only $440 million worth of these call options will participate in the expiry.
Based on the current price trends, the following scenarios are the most likely, depending on the settlement price and the availability of options contracts for calls and puts on June 28:
1. Between $57,000 and $60,000: There are 660 calls versus 14,850 puts, favoring the put options by $820 million.
2. Between $60,000 and $62,000: There are 3,910 calls versus 11,140 puts, favoring the put options by $430 million.
3. Between $62,000 and $64,000: There are 5,220 calls versus 8,690 puts, favoring the put options by $215 million.
4. Between $64,000 and $66,000: There are 6,880 calls versus 6,940 puts, resulting in a balanced outcome between call and put options.
This rough calculation assumes that call options are primarily used for bullish bets and put options for neutral-to-bearish positions. However, it does not consider more complex investment strategies.
In summary, Bitcoin bulls need to maintain support at the $60,000 level before the June 28 expiry to avoid a potential scenario where put options at Deribit are favored, amounting to $820 million. It is important to note that this article does not provide investment advice or recommendations, and readers should conduct their own research before making any decisions.