New Bitcoin Price Rally Puts Bulls Profits From Expiring Friday’s $1.2 Billion BTC Options

Every time a new bitcoin (BTC) All-time highs are formed, and excessive expectations follow. This time was no different as its price briefly touched $69,000 in the early hours of November 9.

Words are just words, so there is no loss from being overly up or down, but in the options markets there is a cost to placing these bets. For example, on November 10, the right to buy Bitcoin (a call option) at $100,000 is trading on December 31 at BTC 0.022, or $1,460. For this privilege, the investor pays an upfront fee, which is also known as a premium.

Analysts and pundits quickly release their $100,000 targets after Bitcoin hit its highest monthly close ever. However, history has proven that short-term price estimations rarely work, and it doesn’t matter if you’re an anonymous Twitter person or a well-versed multimillion-dollar cryptocurrency fund manager.

Bitcoin price estimations are often far off

Despite being a successful large-scale venture capital investor, Tim Draper 250 thousand dollars guess the price for 2020 by 88%. Even famous bank analysts can get it wrong, as did Citibank FX Wire’s “Market Commentary” from November 2020 where they cited High potential $318 000 In 2021. However, with 50 days until the end of the year, some of these prophecies may turn out to be true, but the majority are still better than random numbers.

Perhaps the bears are eyeing regulatory hurdles, for example, Singapore has become Latest Crypto Derivatives Exchange Service Ban Area. Huobi Global announced on Tuesday that it will close the accounts of all users residing in Singapore by the end of March 2022. In September, the Securities and Exchange Commission of Thailand also announced Recommended revocation of Huobi’s domestic operating license.

Preliminary analysis based on the open interest of call (buy) and put (sell) options provides a balanced position for the options expiration on November 12 of $1.3 billion.

Bitcoin options collect open interest for November 12th. Source: Bybt

At first glance, the $630 million put (call) options dominate the weekly expiration by only 12% compared to the $565 million put (call) option.

However, the 1.12 buy-to-buy ratio is deceptive as the recent rally is likely to erase most of the bearish bets. For example, if the bitcoin price remains above $66,000 at 8:00 AM UTC on November 12, every selling (sell) instrument becomes nearly worthless. There is no value in the right to sell Bitcoin at $58,000 or $62,000 if it is trading above that price.

Bulls may aim for $410 million profit above $70,000

Here are the four most likely scenarios for the end of November 12. An imbalance in favor of either side represents the theoretical profit. In other words, depending on the expiration price, the active quantity of the buy (buy) and sell (sell) contracts varies:

  • Between $64,000 and $66,000: 2440 calls vs 310 puts. The net result is $135 million in favor of Buying Instruments (Bull).
  • Between $66,000 and $68,000: 3,430 calls vs 50 puts. The net result is $225 million in favor of Buying Instruments (Bull).
  • Between $68,000 and $70,000: 44,070 calls vs 10 puts. The net result is $305 million in favor of Buying Instruments (Bull).
  • Above $70,000: 5820 calls vs 0 puts. The net result is complete domination, with the bulls earning $410 million.

This rough estimate considers that call options are used exclusively on bullish bets while selling options are in neutral to bearish trades. This oversimplification ignores more complex investment strategies.

For example, a trader could sell a put option, effectively gaining positive exposure to Bitcoin above a certain price. Unfortunately, there is no easy way to estimate this effect.

The bears’ best hopes turned out to be ineffective

After a 19% rally in 30 days, the bulls took control of the weekly expiry on November 12th. One factor that may be partly responsible for this movement is the lack of a negative impact on price yet A $1 trillion US infrastructure bill The US House of Representatives passed. The bill requires that all transactions of digital assets over $10,000 be reported to the IRS.

Traders should keep in mind that even bearish news has little or no effect on price during uptrends. Moreover, the effort the bears need to put pressure on the price increases and is usually ineffective.

Bulls may take advantage of the current situation by pushing BTC above $70,000, which will result in an additional $105 million profit that will take their total to $410 million.

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