$430 million in ETH options expire on Friday and derivatives data shows that bulls are in control and planning to push prices higher in the short term.
Ether’s (ETH) 81% rally over the last three weeks caught professional traders off-guard, and this week’s upcoming options expiry reveals that of the $430 million in contracts set to expire, only 7% of the neutral-to-bearish put options will be available if Ether holds above $3,200 on Aug. 13.
Ether price in USD at Coinbase. Source: TradingView
Curiously, the crypto market is holding its recent strength despite the Senate’s ‘crypto-critical’ infrastructure deal that recently passed. Although the $1 trillion infrastructure bill may encounter some lengthy hangups in the House of Representatives, the approved version did not clarify what constitutes a cryptocurrency broker, and this is expected to harm the industry in the future.
Institutional investors were likely behind the recent rally
Institutional investors’ adoption continues to increase and this week Neuberger Berman, a New York-based investment management firm, filed for a commodity-focused fund. The $164 million commodity strategy fund plans to gain crypto exposure using trusts and exchange-traded funds.
Furthermore, Coinbase exchange reported that 10 out of the top 100 largest hedge funds in terms of assets under management are clients of the platform. Even more interesting for Ether supporters was the ‘flippening’ that occurred as the exchange traded more Ether volume than Bitcoin (BTC) in the second quarter of 2021.
Coinbase cited the emergence of new use cases, including decentralized finance (DeFi), non-fungible tokens (NFT) and smart contracts as the reason for the high Ether volumes. Whatever the case was that fueled Ether price, bulls now enjoy a vast advantage leading into Friday’s options expiry.
Ether Aug. 13 options aggregate open interest. Source: Bybt.com
Open interest shows an apparent balance between calls and puts
The initial view shows a reasonable balance between the neutral-to-bullish call options and the protective puts, which indicates that bulls lacked the confidence to bet on the recent rally.
Moreover, more than half of the bets have been placed between $2,100 and $2,900. This data clearly shows that professional traders weren’t expecting a rally above $3,000.
The result is a meager $2 million of protective puts that will participate in Friday’s option if Ether holds above $3,200. This number increases to $19 million if bears manage to push the price below $3,100, and it rises to $27 million if Ether trades below $3,000 on Aug. 13.
Bulls currently lead by $165 million
$167 million of the call (buy) options have been placed at $3,200 or lower. The net result would then be a $165 million advantage for this neutral-to-bullish instrument. This gap will be reduced to $120 million if bulls fail to hold the $3,100 support.
A 10% negative move from the $3,200 price would reduce the neutral-to-bullish instrument advantage to a comfortable $90 million. Thus, there’s no reason to believe that bears will try to pressure the price solely due to Friday’s options expiry.
Currently, the bulls have complete control and will likely use their profits to create additional bullish bets for the upcoming weeks.
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