Interesting26 Jun 2023 21:51
The bullish buzz returned to the crypto market last week as bitcoin (BTC), the leading cryptocurrency by market value, jumped more than 15% in its best performance since March. Now a significant event looms on the horizon.
On Friday at 08:00 UTC some 150,633 bitcoin options contracts worth $4.57 billion and 1.23 million ether contracts valued at $2.3 billion will expire on Panama-based Deribit exchange, which controls over 85% of the global options activity. The bitcoin contracts due for settlement account for 43% of the total open interest, according to Amberdata.
In bitcoin's case, investors have recently bought call options with strike prices at and above $30,000. As a result, that level has the highest open interest – or the number of active contracts – and market makers/dealers, who create order book liquidity by taking the other side of the investors' trades, hold a significant amount of "negative (short) gamma" exposure.
Options are derivative contracts that give the purchaser the right to buy or sell an asset at a predetermined price at a later date. A call gives the right to buy, a bullish position, and the put confers the right to sell, a bearish position. Being short (negative) gamma means holding a short or sell position in the call or put options.
The large build up of open interest at $30,000, means the spot price could gravitate to around that level in the lead up to the expiry. Bitcoin is currently trading just above $30,000, according to CoinDesk data.