Similar to regular options, cryptocurrency options allow investors to hedge their positions, make predictions about price changes, or even make money by selling options. Option expiries describe the moment in an option contract's life when the option is either exercised or loses all of its value.
According to statistics, recent cryptocurrency derivatives trading has focused more on Ethereum options than Bitcoin options. Because of this, a total of 217,000 ETH option contracts are due to expire soon.
25,000 Bitcoin options will expire with a put-call ratio of 0.7, a maximum pain point of $29,000, and a notional value of $0.72 billion, according to a tweet from Greeks.live on Twitter.
On the other hand, 217,000 ETH options will also expire with a put-call ratio of 0.83, a maximum pain point of $1,950, and a notional value of $0.42 billion.
An option is a financial instrument that gives traders the chance to purchase or sell an underlying asset, such as Bitcoin or Ethereum, at a specified price before a particular expiration date.
The put-call ratio, on the other hand, is a metric that assesses the market's distribution of put options (which provide the right to sell), and call options (which grant the right to purchase).
A high put-call ratio often indicates a pessimistic approach from the market, whereas a low ratio suggests a bullish one.
The maximum pain level, sometimes referred to as the maximum pain point, is the price at which the majority of options will expire and where option owners (buyers) will experience the highest degree of financial agony.
Interestingly, this maximum pain point happens to be extremely close to the current price at which Ethereum is trading.
The number of traded put (short) contracts divided by the number of traded call (long) contracts yields the put/call ratio. A value over 0.7 or 1 indicates a negative trend since more traders are opening short contracts.
Greeks.live reports that with the current Ethereum options, the put/call ratio is 0.83.
Recall that anything above a 0.7 to 1 ratio is often viewed as bearish.
Also, according to the Greeks.live Twitter account, 25,000 Bitcoin options contracts are about to expire. These have a maximum pain point of $29,000 and a notional value of $0.72 billion.
With Bitcoin options, the put/call ratio is 0.7, which is often seen as neutral.
The market impact when they expire should thus be minor because the existing ratios are not strongly tilting in either direction.
After Kraken led all validators migrating to unstake with +90% of the exit queue breakdown, a large tranche of ETH has been removed from the network, contributing to the ongoing bearishness to some degree.
CoinMarketCap data shows that at the time of writing, Ethereum has declined by 1.8% over the last day, and has expanded its 7-day loss by about 8.7%.
In the chart, the $2,100 zone proved to be unbreakable for the cryptocurrency at the moment and has caused a massive decline to the $1,930 zone where the cryptocurrency sits at the time of writing.
Ethereum has declined in the charts and is now testing support at $1,930. Ethereum has broken slightly through this resistance and is facing a real possibility of falling right through to the bottom side.
However, the RSI has fully normalized (50.79), creating a balance of sorts between the bulls and bears. Ethereum still has a chance of bouncing off the $1,930 zone and reaching for another retest of $2,100.
However, in the event of a breakdown of this support, the cryptocurrency is expected to trend lower, into a retest of the $1,670 zone.
Disclaimer: Voice of Crypto aims to deliver accurate and up-to-date information, but it will not be responsible for any missing facts or inaccurate information. Cryptocurrencies are highly volatile financial assets, so research and make your own financial decisions.