The expiration of futures and options on May 28th could be a tipping point for Ether (ETH) as the cryptocurrency rebounded 60% from its low of $ 1,730 on May 23rd. Although open positions are $ 6.2 billion, only 16% run off Friday as most of the action on perpetual and contracts takes place in June.
The expiry of the options must be taken into account as this can lead to an imbalance of forces. This feature does not apply to futures markets where longs (buyers) and shorts (sellers) match at all times.
The options are divided into two independent segments: call options, which are most commonly used for neutral-to-bullish strategies, and options that are neutral-to-bearish (sell).
While ether futures longs and shorts are always coordinated, the options markets therefore offer a clear picture of which side is taking advantage.
The open positions in Ether futures were drastically reduced after the correction
The relentless decline, initiated after the all-time high of $ 4,380 on May 12, lasted 11 days, and the price eventually bottomed at $ 1,730. The low prices didn’t last long, however, and Ether quickly restored support at $ 2,400. Open interest in futures was reduced 54% to $ 5.2 billion as leverage longs were liquidated and short sellers took profits.
In the $ 980 million ether futures set to expire on Friday, the Huobi crypto exchange is taking the lead with $ 300 million in open positions. CME is following it closely; However, CME traders have traditionally moved most of the positions in the past few days of trading, so this number could be reduced significantly as we near the deadline.
At first glance, options prefer neutral to bullish call options
At the end of May 28, 189,000 call (buy) ether options are stacked against 153,900 put (sell) options. This initial analysis gives neutral to bullish calls a 23% advantage. One has to take into account, however, that a right to buy ether in less than 16 hours for $ 3,200 or more is currently not particularly desirable.
Same goes for the ultra-bearish put options at $ 2,300 and below. In order to properly analyze the possible pressure after Friday is over, both extremes should be excluded.
Note that $ 3,000 is a critical level for bulls as there are 30,700 call options stacked there versus 15,000 put options. This means that if bears manage to keep Ether below that price, the neutral to bullish call options will be 54,500 ETH, which is $ 150 million.
Meanwhile, the neutral to bearish put options of $ 3,000 and above amount to 52,700 ETH, which equates to $ 145 million in open positions. This leads to a balanced force after the options expire.
Bulls have little incentive to push the price above $ 3,000
If bulls decide to show strength and push the price above $ 3,000, the difference will shift by 45,700 ETH contracts worth $ 125 million. While significant, it is unlikely to be enough to add to the price.
Futures traders were less than bullish after the recent severe liquidations Cointelegraph reported on May 24th. In terms of options, calls and puts appear to be balanced at current levels and should come as no surprise on Friday.
The expiration times for Huobi, OKEx, and Deribit are on May 28th at 8:00 AM UTC. The CME futures and options take place a little later in the day at 3:00 p.m. UTC.
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