To understand the impact of the recent price movement, traders should analyze the weekly options expiry. Deribit derivatives currently hold an 86% market share in this segment, and the aggregate open interest for Friday currently stands at $357 million.
The neutral-to-bullish call (buy) option provides upside price protection to buyers, and the protective put (sell) option holders are safeguarded from downside price movements. By measuring each option’s price-risk exposure, traders can better understand how bullish or bearish traders are positioned.
Options data shows bears were caught by surprise
The initial view shows a reasonably balanced situation because the call-to-put ratio stands at 1.15, which slightly favors the neutral-to-bullish call option by 15%. This indicator reflects the 70,956 call options that are equivalent to $191 million in open interest, stacked against 61,632 put options, which reflect $166 million in open interest.
As the chart indicates, bears were not expecting Ether to reach $2,700, and this can be seen where there are no protective put options (pink area) above that strike price.
If Ether remains above this level by Friday, all of those 61,653 contracts will become worthless. This is extremely unusual and reflects just how unexpected the strong upward price move was.
The bulls’ advantage largely depends on Ether at $2,600
While every protective put option becomes worthless above $2,700, part of the neutral-to-bullish call options has been placed at $2,800 and $3,000. This means that even if Ether sustains at $2,700, 39% of the call options’ $191 million in open interest becomes worthless.
At $2,700, the neutral-to-bullish call options have a $116-million advantage. However, if Ether trades below $2,600 at Friday’s expiry, this figure will decrease to $75 million.
Either way, these weekly options largely favor bulls and boost their reserves for additional bets for the upcoming expiries in August. Bears should prepare to lick their wounds and wait for a local top before trying new bearish options trades.
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