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On April 23, $250 million in Ether options will expire, and data from futures shows that bulls still have a slight advantage.
Ethereum opened the way for lower transaction fees with its Berlin update on April 15. However, traders are conscious that Ethereum Improvement Proposal 1559 is the most anticipated and controversial upgrade expected for the upcoming London hard fork.
The EIP implements a base charge that is burned if a transaction happens, while miners are rewarded for validating transactions. This move would have a significant impact on miners’ profits, but the plan seeks to reduce the network’s skyrocketing gas fees that have crippled it for the past two years..
The recent rally and conflict with miners boosted demand for protective options
Both the Berlin and London updates are needed to meet the network’s noninflationary issuance timeline, which serves as the foundation for the Ethereum 2.0 proof-of-stake network. Given the 153 percent cumulative returns in 2021, investors should continue to use short-term options as a hedging instrument more aggressively.
While the neutral-to-bullish call (buy) option provides the buyer with upside price security, the bearish put (sell) option does the reverse. Traders may gain insight into how bullish or bearish traders are placed by calculating the risk tolerance at each price level.
The cumulative number of contracts due to expire on April 23 is 101,300, or $250 million at the current price of Ether (ETH) of $2,450. Bulls, on the other hand, seem to be in smaller amounts, as call (buy) options account for just 35% of available interest.
Bulls have a slight advantage after the recent rally
While the initial image seems bearish, keep in mind that the sub-$2,000 put (sell) options are almost useless with less than eight days remaining. When the 17,600 bearish contracts now traded below $10 each are withdrawn, the situation becomes more balanced.
With 58 percent of the remaining 80,500 Ether contracts, neutral-to-bearish put options continue to dominate. Meanwhile, given the existing Ether price, the open interest stands at $197 million, granting the bears a $30 million advantage.
The bears could have been taken off balance when Ether hit a new all-time high above $2,500. Just 6,600 Ether put options at $2,450 or higher remain, accounting for 10% of the number.
In the meantime, the neutral-to-bullish call options total 19,500 Ether contracts. This gap reflects a $31 million open interest advantage for bulls. Bears would only take a comparable lead, although a slight one, if Ether’s price fell to $2,200 on April 23.
It is worth remembering that $30 million is a big enough sum to incentivize the 10% price drop needed to drive Ether down to $2,200 and tip the scales in favour of the bears.
This data shows that the impending April 23 expiration of $250 million in options would go unnoticed.