Ethereum price hits $3,800, boosting bulls' control in Friday's ETH options expiry

Published at: Oct. 14, 2021

Ether (ETH) entered a slightly bullish channel earlier this month and currently, the price is marching toward the $3,800 level. Despite the recent turbulence, Ether bulls are set to bag a $53 million profit on Oct. 15's weekly options expiry. 

Investors also appear to be disinterested in Ether's recent underperformance versus Bitcoin (BTC) and to date, the altcoin's gains stand at 265%. If Ether manages to stay above $3,600 on Friday, 99% of the $180 million put (sell) options will become worthless.

Ethereum smart contract competitors continue to pressure the leading network and at the time of writing, Ethereum's average gas fees remain above $20. Polkadot (DOT) is scheduled to begin its sidechain auctions on Nov. 11, and this will support new token launches, decentralized finance (DeFi) applications, Internet of Things (IoT) solutions, all going through trustless cross-network bridges.

This week, Binance Smart Chain revealed plans to launch a $1 billion fund to accelerate adoption across the entire crypto industry. Investors usually interpret potential incubation events backed by blockchain projects as bullish for their native assets and BNB price gained at least 30% since the announcement.

Bears were not expecting prices above $3,300

Based on the recent mildly negative newsflow, it is possible to understand why bears placed 88% of their bets at $3,300 or lower. Had bulls been a little less greedy, they could have dominated Oct. 8's $365 million expiry.

The Oct. 15 expiry is perfectly balanced between call (buy) and put (sell) options according to the long-to-short ratio. Still, this birdseye view needs further detail, depending on the expiry price.

At first sight, both sides hold some $180 million worth of Ether options, as indicated by the 1.03 call-to-put ratio.

However, this metric is deceptive because the recent Ether rally will likely wipe out most of their bearish bets. For example, if Ether's price remains above $3,500 at 8:00 am UTC on Friday, only $6.6 million of the put (sell) options will be available.

Bulls are comfortable at $3,600

Any expiry price above $3,500 is a bear trap, although a $32 million advantage should not be enough to cause damage. To put things in perspective, Ether's monthly options expiry holds over $800 million open interest.

Below are the four likeliest scenarios considering the current price levels, as the imbalance favoring either side represents the potential theoretical profit from the expiry.

The data shows how many contracts will be available on Oct. 15 for both bulls (call) and bear (put) instruments.

Between $3,300 and $3,500: 7,450 calls vs. 3,550 puts. The net result favors bulls by $13 million;Between $3,500 and $3,600: 11,150 calls vs. 1,900 puts. The net result favors bulls by $32 million;Between $3,600 and $3,800: 15,400 calls vs. 600 puts. Bulls' profit increases to $74 million.Above $3,800: 27,450 calls vs. 0 puts. Bulls dominate by profiting $104 million.

This crude estimate considers call (buy) options used in bullish strategies and put (sell) options exclusively in neutral-to-bearish trades. However, a trader could have sold a put option, effectively gaining a positive exposure to Ether above a specific price. Unfortunately, there's no easy way to estimate this effect.

Bears need sub-$3,500 to balance the scales

Bulls' profit increases to $104 million with Ethereum trading above $3,800, thus a $30 million increase from the current $74 million estimated gain. On the other hand, there's a $61 million gain from the bear's perspective by pressuring the price below $3,500, as the above estimate shows.

With little over a day before the Oct. 15 expiry, the bears will have a hard time suppressing the current bull run. Regardless of the competition the Ethereum network faces and the high gas fees, investors' demand for decentralized finance (DeFi) and nonfungible tokens (NFTs) seem to be enough to keep Ether in an uptrend.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

Tags
Markets
Ethereum
Altcoin
Market Analysis
Cryptocurrencies
Ether Price
Binance Coin
Ethereum Options
Derivatives
Sidechains
Related Posts
Ethereum bulls chase $2,200 ahead of Friday’s $230M ETH options expiry
Ether’s (ETH) $1.5-billion monthly expiry on June 25 was slightly favorable for bears, and at the time, Cointelegraph reported that the $2,200 price was critical to eliminate 73% of the neutral-to-bearish put options. However, bulls were unable to sustain their advantage because the expiry price was near $1,950. In the end, the protective put options outnumbered the neutral-to-bullish call options by $30 million. Fast forward to July, and after a noticeable 10% rally, Ether’s price again struggles to sustain the $2,100 support. Bitcoin’s (BTC) negative 3.5% performance could partially explain last week’s price move, but the London hard fork scheduled …
Markets / July 2, 2021
Ethereum bulls may reemerge after March $1.15B ETH options expiry
Over the past two months, the open interest on Ether (ETH) options increased by 50% to reach $3.1 billion, with ETH price gaining 44% in that time period. Ether's price appreciation and the rising options open interest has resulted in a potentially historic $1.15 billion expiry set for March 26. Most exchanges offer monthly exposures, although a few also hold weekly options for short-term contracts. February faced the most significant expiry on record, with $630 million worth of options contracts, and this figure represented 23% of all the open interest at that time. The above data shows that Ether's March …
Markets / March 19, 2021
2 key Ethereum price metrics prove pro traders are behind ETH’s new highs
As Ether (ETH) made a $2,800 all-time on April 29, so did its futures open interest. The $8.5 billion figure marks a 52% monthly increase and shows robust trading activity behind the meteoric price rise. Some analysts might dismiss Ether derivatives, considering CME's future has $355 million in open interest compared to Bitcoin's $2.4 billion. However, Ether contracts were only launched a couple of months ago. Both FTX and Deribit require 100% full-KYC for their clients, and these markets hold a combined $2 billion in ETH open interest. To this in perspective, the open interest on silver futures currently stands …
Markets / April 30, 2021
Ethereum bulls maintain control ahead of Friday’s $730M ETH options expiry
Ether (ETH) initiated a rally on April 25, which resulted in a 90% gain that pushed the price to $4,200. The nonstop action has been fueled by an incredible increase in decentralized finance (DeFi) applications, where the total value locked has surpassed $74 billion, a 51% increase in 18 days. This positive momentum has been decimating the neutral-to-bearish put (sell) options, giving bulls even more incentives to continue the rally. On May 14, a total of $730 million Ether options are set to expire, and bulls have complete control as the call (buy) options are in the majority. Record-high decentralized …
Markets / May 13, 2021
Ethereum derivatives look bearish, but traders believe the ETH bottom is in
Ether (ETH) rallied 5.5% in the early hours of Nov. 29, reclaiming the critical $1,200 support. However, when analyzing a broader time frame, the 24% negative performance in the past 30 days significantly impacts investors' sentiment. Moreover, investors’ mood worsened after BlockFi filed for bankruptcy on Nov. 28. Newsflow remained negative after the United States Treasury Department's Office of Foreign Assets Control (OFAC) announced a settlement with Kraken exchange for "apparent violations of sanctions against Iran." In a Nov. 28 announcement, the OFAC said Kraken had agreed to pay more than $362,000 as part of a deal "to settle its …
Markets / Nov. 29, 2022