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Bitcoin options market bearish ahead of quarterly expiry

The put-call ratio for bitcoin options on Deribit ahead of today’s quarterly expiry has climbed to 1.66. A ratio surpassing one indicates a notable preference for put options over call options in trading activity, suggesting more investors are anticipating or safeguarding against a potential decline in prices rather than an upswing.

Data from Deribit for end-of-June options reveals that 107,000 bitcoin options are reaching expiration, carrying a maximum pain threshold at $61,500 and a total notional value of $6.6 billion. At the time of reporting, bitcoin is priced at $61,398, approaching the maximum pain level just prior to expiry. This suggests that the bitcoin price is nearing a point where a substantial number of options could expire without value. Traders may be adjusting their positions to capitalize on this scenario, potentially contributing to reduced market volatility and enhanced stability as the expiration approaches.

Today marks the quarterly options expiry for both outstanding bitcoin and ether contracts, with a combined notional value exceeding $10 billion slated to expire on Deribit. This significant event represents over 40% of Deribit’s current open interest.

According to Deribit CEO Luuk Strijers, Friday’s substantial quarterly expiry may be influenced by a “quadruple witching” event and associated volatility in U.S. markets. Quadruple witching occurs quarterly when contracts for index futures, index options, options, and futures all expire simultaneously.

The large volume of expiring contracts can impact spot prices, as positions unwind and contracts are rolled over, potentially leading to significant price fluctuations. However, the fact that the spot price is nearing the maximum pain threshold might alleviate some of this impact, given that this threshold signifies the highest number of expiring options contracts rendered worthless.

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