How $161 million in Ethereum options expiry favours bulls as ETH flips $2K to support

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The price of Ethereum recently surpassed $2,000, and derivatives evidence shows that bulls are planning to drive the price of ETH higher.

With no short-term solution to the growing network fees in sight, some investors are worried that the Ether (ETH) price will plummet. The EIP-1559 plan is expected to be bundled with the upcoming London update, which will improve the gas fee system, but traders must live with high fees before then.

The scalable block size proposal strives for a more stable fee pricing model, but this update is planned for July, which means Ether will face market pressure in the short term. Furthermore, miners have expressed fear since the current plan seeks to burn a portion of the fees to generate shortages, cutting their profits by up to 50%.

Professional traders, especially those farming and staking with high yields, generally purchase defensive put options without reducing their positions to brace for downside events. While these are usually more expensive for longer time spans, they are still available on certain markets on a weekly or bi-weekly basis.

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The put-to-call ratio favors bears, but there’s more to it

Options, unlike futures contracts, are divided into two categories. Call (buy) options enable the buyer to acquire Ether at a predetermined price on the expiry date. In general, these are applied to either neutral arbitrage transactions or bullish tactics.

Meanwhile, put (sell) options are widely used as a buffer against unfavourable price fluctuations.

To consider how these opposing powers are balanced, compare the size of calls and puts at each expiry price (strike).

For those who are unfamiliar with options techniques, Cointelegraph recently clarified how to reduce risks while staying bullish.


Aggregate Ether April 9 expiry open interest. Source: Bybt

According to the above info, Ether’s April 9 expiry has 77,800 Ether contracts worth $161 million at the current $2,070 stage. Meanwhile, the call-put ratio favours more bearish put options by 11 percent, with strikes below $1,850 dominating. Bullish call options have saturated the market beyond $1,900.

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Despite the imbalance, the net impact leans bullish

Options markets are an all-or-nothing affair, which means they either have value or lose value if they sell over the call strike point, or vice versa for put option holders.

As a result, it is easier to quantify the possible effect of next Friday’s expiry by removing the neutral-to-bearish put options 25 percent below the existing $2,070 price and the call options above $2,480. Incentives to increase or decrease the price by more than 25% become less likely as the potential gains rarely exceed the cost.

This range entices 33,000 call options with strike prices ranging from $1,200 to $2,480, which are currently worth $68 million. Meanwhile, bearish put options with a strike price of $1,580 total 18,100 Ether contracts worth $37 million. As a result, consumers have a marginal edge for the April 9 expiry date.

The proportion of call and put options The call-to-put ratio originally favoured the more bearish put options. Nonetheless, by eliminating put options priced at 25% less than the market bid, the nett effect obviously favours bulls. This confirms the opinion that the April 9 expiry can not be viewed as bearish.

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