On September 25, the expiration date of 415 million Ethereum (ETH) option contracts will expire. Due to the size of these contracts that will expire, there is an expectation of price volatility in the markets. Considering the current Ethereum prices, most options traders are expected to lose large amounts of money.
Options due to expire this Friday represent $ 412 million open interest, which is the largest expiry date of Ethereum options to date. For this reason, it is very likely that we will see price volatility for ETH.
Ethereum Options Traders Worried About The Current Situation
Deribit is considered the leading platform for options contracts in Bitcoin and Ethereum, with 75% and 92% market share, respectively.
With current prices, option buyers in Derbit are expected to lose money. Many purchases purchased at a transaction price of around $ 340 million will become worthless when the option contract expires.
Option contracts give their buyers the right to buy or sell an asset at a specified date in the future. These rights are purchased by paying a one-off premium for each contract and earnings are only possible if the profit premium is exceeded.
If the Ethereum price drops to $ 60 on September 25, 2020, then traders with put options can make good profits by selling their assets at the contract’s strike price. Similarly, if the price of Ethereum is $ 600, contract holders can purchase ETH at the low amount specified in their contract. However, if ETH stays at $ 340, there will be losses for both sellers and buyers. On the other hand, sellers of these options will take profit from these bonuses.
The sell / buy ratio of 0.84 in Derbit indicates that the options market is currently in an upward trend with high volumes of unstable call options at a transaction price of $ 400-560. Options contracts are often purchased to hedge against spot or mining risk. Therefore, the losers in the options market will try to adjust their futures and spot risks accordingly, with the expectation of moves to be made on September 25 and after.
Ethereum’s daily volatility for three months has averaged between 4.4% and 6% over the past four years. ETH volatility, which has been on the decline since 2019, is changing with the uncertainty brought about by the coronavirus outbreak and the explosion expectation of DeFi projects.