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Bulls and bears are both concerned about the result of the $1.5 billion Ethereum options expiry on June 25.
On June 25, Ether (ETH) will have its largest option expiry in 2021, with $1.5 billion in open interest being resolved. This number is 30% more than the March 26 expiry, which occurred when the price of Ether fell 17% in 5 days to approximately $1,550.
However, after March’s option expiry, Ether surged 56 percent, reaching $2,500 in three weeks. These movements have nothing to do with Bitcoin (BTC). As a result, it is critical to determine whether a similar market structure is in the works for the June 25 futures and options expiry.
Recent history shows a mix of bullish and bearish catalysts
Ether miners planned a “show of force” against EIP-1559 on March 11, which would severely cut their profits.
On March 22, CoinMetrics released a “Ethereum Gas Report,” suggesting that the widely anticipated EIP-1559 network update will most likely not alleviate the high gas problem.
On March 29, Visa revealed intentions to use the Ethereum blockchain to settle a fiat transaction, and on April 15, the Berlin update was successfully deployed. According to reports, once Berlin went live, “the average gas fee began to decline to more manageable levels.”
Before jumping to conclusions and speculating whether these phenomena of the Ether price bottoming near the upcoming $1.5 billion options expiry are bullish or bearish, it’s best first to analyze how large traders are positioned.
Take note of how the June expiry has over 638,000 ETH options contracts, accounting for 45 percent of the entire $3.4 billion open interest.
Options, unlike futures contracts, are classified into two categories. Call (buy) options let the buyer to acquire Ether at a predetermined price on the expiration date. These are often employed on neutral arbitrage transactions or bullish schemes.
Meanwhile, put (sell) options are frequently employed to hedge against or protect against negative price movements.
For bulls, $2,200 is the line in the sand
As shown above, there are a disproportionate number of call options with strike prices of $2,200 or more. This indicates that if Ether’s price falls below this level on June 25, 73 percent of the neutral-to-bullish options will be worthless. The 95,000 remaining call options would imply a $228 million open interest.
Most protective put options, on the other hand, have been opened at $2,100 or below. As a result, 74 percent of those neutral-to-bearish options will lose value if the price remains above this level. As a result, the remaining 73,700 put options would amount to $177 million in open interest.
It is early to predict who will win this race, but given Ether’s current price of $2,400, it appears that both sides are relatively comfortable.
However, traders should keep a watch on this occurrence, especially given the price effect of the March expiry.