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Bitcoin and Ether Options Reach Record $20B Amid ETF Excitement

Walter Swift

ByWalter Swift

Oct 27, 2023
Cryptocurrency Security

Bitcoin and Ether options on Deribit have reached a landmark combined open interest of $20 billion, underscoring a growing sophistication in the market. As the week concludes, Deribit is set to settle monthly bitcoin and ether options amounting to several billion dollars.

Growing Interest in Options Reflects Market Sophistication

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Deribit, a leading crypto exchange, has witnessed a notable surge in the dollar value of active bitcoin and ether options contracts, with the notional open interest touching $20.64 billion, as revealed by data from Swiss analytics firm, Laevitas.

This nearly matches the previous high recorded in November 2021, when bitcoin’s value stood 90% higher than the present rate. Interestingly, the present open interest was achieved with almost twice the number of existing contracts compared to last November.

Luuk Strijers, Deribit’s Chief Commercial Officer, expressed the significance of this development. He mentioned that this not only marks a huge win for Deribit, which dominates 90% of global crypto options activity, but also reflects the general market’s expansion and the increasing allure of options.

Options are complex financial instruments that provide buyers the choice, though not an obligation, to purchase or offload the underlying asset at a set price within a given timeframe. They are typically divided into call options (right to buy) and put options (right to sell), each signaling a bullish or bearish market sentiment, respectively.

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Options Activity Influencing Spot Market Trends

The unprecedented volume in the options market indicates that decisions from investors and market makers within this domain are increasingly shaping the spot market price. Recently, market makers were identified to possess a net short gamma exposure for bitcoin. 

This suggests they might have purchased more of the top cryptocurrency during its upward trajectory to balance their overall stance, unintentionally amplifying the surge in bitcoin’s price. Remarkably, in just a fortnight, bitcoin has seen a 30% jump, now trading over $34,000.

It’s worth noting that later today, at 08:00 UTC, Deribit will see the expiration of BTC and ETH options contracts totaling $4.5 billion. Regular monthly and quarterly settlements such as these are recognized for instigating fluctuations in the crypto landscape.

Bullish Trends Observed in Bitcoin’s ITM Calls

The majority of the open interest in bitcoin can be found in ITM calls, particularly in options with strike prices below the current market value of BTC. These ITM calls witnessed a surge in demand as traders flocked to purchase them over the recent two-week period when bitcoin’s price shot up from $27,000 to $35,000.

For clarity, a call option is deemed “in the money” (ITM) when the price of the underlying asset surpasses the strike price of the call option. Conversely, a put option is considered ITM when the price of the underlying asset is less than the put option’s strike price.

Luuk Strijers commented on the imminent expiration of options, highlighting, “A noteworthy value of $4.5 billion in options is set to expire this Friday. Due to recent market trends, an unusually large proportion of these are positioned to expire in the money (ITM). This scenario is likely to stimulate further market activity.”

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Walter Swift

Walter Swift

Walter Swift is an adept crypto writer, known for his deep insights into the decentralized world. His pieces artfully break down complex blockchain topics, making them accessible to a broad audience. With a passion for emerging technologies, Walter's articles are a beacon for crypto enthusiasts and novices alike.

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