shorts are currently ready for the $510 million BTC option expiration this week, but their overconfidence may give the bulls a chance to turn the tables.
Bitcoin has been trying to break through the $20,500 resistance level for the past 35 days, the most recent attempt failed on October 6. Meanwhile, the bears showed strength on four different occasions after BTC tested below the $18,500 level during this period.
Bitcoin/USD Price Index, 12-hour chart
Investors are still unsure whether the 18,200 USD is really the bottom, as support levels weaken every time you test. That’s why it’s important for bulls to maintain momentum during the $510 million option expiration this week.
On October 21 options expiration is especially important because Bitcoin shorts can make $80 million profit by pushing BTC down below $19,000.
Short bets $19,000 or less
On October 21 open positions for options expired at $510 million, but the actual number will be lower due to the overly optimistic shorts. After BTC fell below $19,000 on October 13, these traders completely missed the bearish bets of $17,500 and below.
Bitcoin Options summarized the call option ratio of open contract
0.77 on October 21, showing the dominance of the $290 million bearish (sell) open positions relative to the $220 million bullish (buy) option. Still, most bearish bets may become worthless as Bitcoin is close to $19,000.
If the price of Bitcoin remains above $19,000 at 8:00 a.m. on October 21, only 4% of these bearish (sell) options are available. This difference occurs because if BTC trades above that level at expiration, the right to sell Bitcoin for $18,000 or $19,000 is worthless.
longs can still turn the tables and make a profit of $150 million
Below are the four most likely scenarios based on the current price trend. The number of Bitcoin option contracts available for bull (bull) and bearish (bear) instruments on October 21 varies by expiration price. The imbalance that favors each side constitutes the theoretical profit:
- between $18,000 and $19,000: 0 call options and 4,300 put options. The end result favors the bearish (bearish) instrument at $80 million.
- between $19,000 and $20,000: 1,500 call options and 1,100 put options. The end result strikes a balance between call and put options.
- between $20,000 and $21,000: 4,300 call options and 100 put options. The end result favors the bullish (long) instrument at $85 million.
- between $21,000 and $22,000: 7,200 call options and 0 put options. The end result favors $150 million for bullish (long) instruments.
This rough estimate considers put options used in bearish bets and call options specifically for neutral bull trading. Even so, this oversimplification ignores more complex investment strategies.
For example, a trader could have sold put options, effectively gaining positive exposure to Bitcoin above a specific price, but unfortunately, there is no easy way to estimate this effect. It is no surprise that
falls below $19,000 again
Bitcoin shorts need to push the price below $19,000 to make a profit of $80 million. On the other hand, the best case scenario for the bulls requires more than $21,000 to turn things around and earn $150 million.
Bitcoin longs cleared $80 million of leveraged long positions on October 12 and October 13, so their margin should be lower than the margin needed to drive the price up. So, before the weekly options expire on October 21, the shorts are more likely to fix BTC below $19,000.
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