Despite Bitcoin (BTC) showing strength during the US session, volatility is expected at the beginning of the European session ahead of options expiration on Friday.
However, as the market quickly adapts to new trading conditions, the impact may be short-term.
Today's Options Expiration: What Traders Need to Know
According to Deribit data, Bitcoin and Ethereum (ETH) options worth over $5.03 billion will expire today. For Bitcoin, the nominal value of expiring options is $4.3 billion, with a total of 36,970 open contracts.
The maximum pain level for today's expiring Bitcoin options is $108,000, with a put-call ratio of 1.06.
For Ethereum, the nominal value of expiring ETH options today is $712.35 million, with a total of 239,926 open contracts.
Similar to Bitcoin, the put-call ratio for today's expiring Ethereum options is over 1, currently at 1.11 according to Deribit data. Meanwhile, the maximum pain level, or strike price, is $2,600.
Notably, today's expiring Bitcoin and Ethereum options are significantly larger compared to last week. On July 4th, BeInCrypto reported expiring options close to $3.6 billion, including 27,384 BTC and 237,274 ETH contracts, with nominal values of $2.98 billion and $610 million, respectively.
However, a key similarity between this week's and last week's expiring options is that both have a put-call ratio (PCR) above 1.
A PCR greater than 1 indicates that put options are being traded more than call options, suggesting a bearish market sentiment.
Bitcoin's PCR of 1.06 and Ethereum's PCR of 1.11 represent balanced betting between sell and buy orders. This reflects a balanced perspective from investors either speculating on market direction or hedging their portfolios against potential declines.
High Leverage Trading Activity... Extreme Risk-Taking
Analysts from Greeks.live note minimal consensus on market direction, with most activity focused on news events. However, they also emphasize high leverage trading activity and extreme risk-taking.
"Traders are discussing 500x leverage positions that appear 'suicidal' at current market levels. New positions are being opened despite extreme risks, described as intriguing. Discussions about 100% signal trading setups suggest high confidence but propose high-risk strategies." – Shared in Greeks.live post
Particularly, high leverage trading at 500x amplifies both profits and losses. Meanwhile, Bitcoin and Ethereum have been trading well above their respective maximum pain levels.
Currently, Bitcoin is selling at $116,823, recording a new all-time high (ATH). Meanwhile, Ethereum traded at $2,970 after rising nearly 7% in the past 24 hours.
The maximum pain point is a crucial indicator in cryptocurrency options trading. It represents the price level at which most options contracts expire worthless. This scenario inflicts maximum financial loss, or "pain," on traders holding these options.
This concept is important as it often influences market behavior. According to the maximum pain theory, an asset's price tends to be drawn to this level at options expiration.
As options approach expiration time at 8:00 UTC on Deribit, Bitcoin and Ethereum prices could decline to these levels. However, this does not necessarily mean BTC will drop to $108,000 or ETH to $2,600.
The market typically stabilizes soon after traders adapt to new price environments. With today's massive expiration, traders and investors can expect similar outcomes, which may influence market trends over the weekend.
