Traders Expect Ethereum Price to Fall Further Ahead of $550M Options Expiration This Friday

The gain of 330% of Ether (ETH) so far this year has been largely driven by the growth of decentralized finance and the rush for non-fungible tokens. Proof of this is that OpenSea, the largest NFT marketplace, has surpassed the impressive $10 billion mark in cumulative trading volume.

However, traders are concerned that the 15% correction that followed the all-time high of $4,870 on Nov. 10 may signal that a larger move down is in the offing. The breakout of the 55-day ascending channel reinforces this thesis and the expiry of $550 mln in Ether options this Friday will likely favor the bears.

Ether/USD pair price chart on Bitstamp. Source: TradingView

The total value locked in Ethereum smart contracts ($86 billion) represents 70% of the market and this metric has increased 25% in the last two months, indicating that the industry leader has not been affected by fees average of USD 50 of the network.

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Adjusted TVL of Ethereum network in USD. Source:

Regulatory uncertainties, especially in the US, have overshadowed the bull run in crypto markets. For example, On Oct. 18, the New York Attorney General’s office issued a “cease and desist” order to two cryptocurrency lending platforms operating in the state.

November 1st, The President’s Working Group on Financial Markets (PWG) released a report focused on the risks of stablecoins to users and financial stability. The report urged Congress to issue a federal prudential framework, invoking the jurisdiction of the SEC and CFTC.

More recently, on November 16, US lawmakers began fighting changes to tax reporting rules for cryptocurrency transactions over $10,000 in the recently passed infrastructure bill. A group of congressmen called for revisions to exclude miners, validators, and wallet developers from tax liabilities under the Bipartisan Infrastructure Framework (BIF).

Whatever the reason behind Ether’s recent price weakness, bulls’ over-optimism on the $550M options expiry this Friday will likely give bears more ammunition to drag the market lower.

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Aggregate Ether Options Open Interest for Nov 19. Source: Bybt

At a glance, the value of $275 million in call options roughly matches the value of $280 million in ETH put instruments. Still, the 0.98 ratio between calls and puts is misleading because some of those prices now look implausible.

For example, if the price of Ether stays below $4,400 at 8:00am UTC on Nov 19, only 7% of call options will enter expiration. Therefore, There is no value in the right to buy Ether at $4,400 if it is trading below that price.

Bears are in full control of Friday’s expiry

Here are the four most likely scenarios for the November 19 expiration. The imbalance that favors one side or the other represents the theoretical gain. That is, depending on the expiration price, the number of purchase (call) and sale (put) contracts that are activated varies:

  • Between $4,000 and $4,100: 80 call options vs. 35,100 put options. The net result favors put instruments (bearish) by USD 140 million.
  • Between $4,100 and $4,200: 340 call options vs. 30,000 put options. The net result favors put instruments (bearish) by USD 120 million.
  • Between $4,200 and $4,400: 4,840 call options vs. 16,900 put options. The net result is USD 60 million in favor of the selling instruments (bearish).
  • Above $4,400: 7,640 call options vs. 8,700 put options. The net result is even.

This gross estimate considers that call options are used in bullish strategies and put options exclusively in neutral to bearish trades. However, a trader could have sold a call option, effectively gaining negative exposure to Ether above a specific price. Unfortunately, there is no easy way to estimate this effect.

The bears have a clear opportunity to secure $140 million in profit

Ether price is currently trading near $4,150, and there is incentive for the bears to push ETH below $4,100 ahead of tomorrow’s expiry. In that case, his estimated earnings reach USD 140 million.

On the other hand, taking into account the 12% correction of Ether in the last three days, the bulls would be more than happy to take a $60 million loss if the expiration price of ETH breaks above $4,200.

Avoiding a $140 million loss is the best case scenario for bulls currently considering the bearish scenario caused by regulatory uncertainties.

The views and opinions expressed herein are solely those of the Author and do not necessarily reflect the views of Every investment and trading move involves risks, you should do your own research when making a decision.

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Traders Expect Ethereum Price to Fall Further Ahead of $550M Options Expiration This Friday

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