Trading Strategies, Altcoins for Bitcoin $ 3 Billion Options Expiration


  • A total of $ 3.2 billion in BTC options are expected to expire – most of them worthless – this Friday.
  • Five top crypto traders and analysts suggest that downward pressure and volatility could increase from there.
  • They also shared some short-term trading ideas and altcoins that could challenge bitcoin’s potential drop.

Despite more than $ 3 billion in bitcoin options expiring this Friday, traders and analysts don’t expect a noticeable impact on the crypto market, but some are preparing to rise


volatility

and downward pressure on the largest cryptocurrency.

A total of 73,702 option contracts worth $ 3.2 billion are due to expire on Friday, according to data provided by Skew. The majority of contracts are expected to expire worthless, as call option interest is focused on strike prices currently above the bitcoin spot price ($ 42,529 at noon Wednesday) and the majority of puts are positioned. at lower strike prices, as noted by Armando. Aguilar, digital asset strategist at Fundstrat Global Advisors.

The $ 50,000 mark has an aggregate interest of 12,700 calls and puts, while the $ 40,000 and $ 60,000 levels are the closest prices with the greatest demand, he added, pointing to the graph below.

Bitcoin options expiration open interest chart on September 24


Distort


Traders are also feeling a lack of hype regarding the upcoming options expiration, according to Patrick Heusser, head of trading at Crypto Finance Brokerage.

“We’ve had discussions on the desktop and also with other options traders,” he told Insider in an email. “If anything, we think volatility is most likely increasing from current levels.”

Heusser adds that the rising volatility could also be linked to potential macroeconomic events such as further credit problems from besieged Chinese property developer China Evergrande or a surprising announcement from the


Federal Reserve

to speed up its tapered timeline.

Aguilar agrees that expirations could increase bitcoin’s price volatility on Friday, but analyst consensus expects it to remain in the last 72-hour price range of $ 40,000 to $ 45,000, has t -he declares.

Faced with macro and regulatory risks as well as technical pressures, bitcoin could have a significant price drop as a result of this expiration, said Joseph Edwards, head of research at Enigma Securities.

“Volumes have been declining aggressively lately, and recent price developments are very reminiscent of September 2019,” he told Insider in an email interview, “and we could see a Q4 overall. deeply negative towards lows of at least $ 20,000. If it broke higher, of course, that would mean all-time highs in no time. “

Trading strategies in a context of increasing volatility

As in any market, volatility can be a trader’s best friend.

For those familiar with options trading, they might look to weekly expiration options sets starting in the quarter, for example, October 1 or 8, Edwards said.

“Implied volatility on most sites is extremely low for early October right now, although it’s gradually increasing,” he explained, “and these are the days after expiration where we expect things are really starting to move. “

Another options strategy that professional traders can deploy is called the “butterfly” trading strategy where they can trade multiple call options on the same expiration date. This strategy allows traders to profit from the upside while limiting losses, Aguilar explained, adding that retail traders could explore arbitrage opportunities.

Altcoins that could challenge bitcoin’s potential decline

As Heusser of Crypto Finance likes to say, whenever there is a technical correction in the market, it is time to “prepare your shopping list” in order to grab some carefully researched tokens on the cheap.

Edwards of Enigma Securities believes that “if the markets bleed, they will bleed as a group.”

But for those looking for some glimmers of hope, it’s worth keeping an eye out for trading tokens like the FTX Token (FTT) and Binance Coin (BNB) as they tend to fall less and rise more during downtrends. Indeed, structural games are considered to be safer than speculative games, he said.

However, if the market soars, investors may turn to oversold layer one protocols, including avalanche (AVAX) and Algorand (ALGO), he added.

Marcus Sotiriou, a seller at GlobalBlock, a UK-based digital asset broker, also sees Avalanche as one of the altcoins that could outperform bitcoin in the coming days and weeks. One of the bullish signs is that Layer One protocol recently raised $ 230 million in a private sale of its AVAX token to a group led by Polychain and Three Arrows Capital.

Upcoming Bitcoin and Crypto Market Outlook

With more demand for downward strikes than upward strikes in the next expiration, there is no doubt that market sentiment is bearish right now, according to Sotiriou.

However, last Friday’s sell call for the month-end contract, which dominated flows, also implies that bitcoin could remain below $ 50,000 at the end of the month and rise in the months to to come.

“This will likely mean that market makers sell BTC in the futures market to stay hedged against their now long position in BTC,” he explained. “In my opinion, it’s bullish for options expiration after Friday, as market makers who are hedged with shorts will have to close their position, resulting in buying pressure.”

Steve Ehrlich, CEO and co-founder of U.S. crypto-asset broker Voyager Digital, also sees “a little bull run until Friday” if the bitcoin spot price stays at current levels.

“If it stays at that level by Friday, investors with in-the-money put options could likely exercise their contracts, which will cause initial downward pressure on the price of BTC due to a oversupply on the sell side, ”he explained. “However, we may see more buying pressure from call holders to push the price up before expiration.”

In the long run, Ehrlich doesn’t believe short-term price volatility will impact the value of bitcoin.

“While it is possible that there will be a drop in prices at expiration, many will see this as a business opportunity,” he said, “and I expect positive price dynamics at long term.”


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