Bears are currently better positioned for this week’s $510 million BTC options expiry, but their overconfidence could give bulls a chance to flip the table.
Bitcoin has been trying to break above the $20,500 resistance for the past 35 days, with the latest failed attempt on Oct. 6. Meanwhile, the bears have displayed strength on four different occasions after BTC tested levels below $18,500 during that period.
Investors are still unsure whether $18,200 was really the bottom because the support level weakens each time it is tested. That is why it’s important for the bulls to keep the momentum during this week’s $510 million options expiry.
The Oct. 21 options expiry is especially relevant because the Bitcoin bears can profit $80 million by suppressing BTC below $19,000.
Bears placed their bets at $19,000 and lower
The open interest for the Oct. 21 options expiry is $510 million, but the actual figure will be lower since the bears were overly-optimistic. These traders completely missed the mark, placing bearish bets at $17,500 and lower after BTC dumped below $19,000 on Oct. 13.
The 0.77 call-to-put ratio shows the dominance of the $290 million put (sell) open interest against the $220 million call (buy) options. Nevertheless, as Bitcoin stands near $19,000, most bearish bets will likely become worthless.
If Bitcoin’s price remains above $19,000 at 8:00 am UTC on Oct. 21, only 4% of these put (sell) options will be available. This difference happens because a right to sell Bitcoin at $18,000 or $19,000 is worthless if BTC trades above that level on expiry.
Bulls can still flip the table and secure a $150 million profit
Below are the four most likely scenarios based on the current price action. The number of Bitcoin options contracts available on Oct. 21 for call (bull) and put (bear) instruments varies, depending on the expiry price. The imbalance favoring each side constitutes the theoretical profit:
- Between $18,000 and $19,000: 0 calls vs. 4,300 puts. The net result favors the put (bear) instruments by $80 million.
- Between $19,000 and $20,000: 1,500 calls vs. 1,100 puts. The net result is balanced between calls and puts.
- Between $20,000 and $21,000: 4,300 calls vs. 100 puts. The net result favors the call (bull) instruments by $85 million.
- Between $21,000 and $22,000: 7,200 calls vs. 0 puts. The net result favors the call (bull) instruments by $150 million.
This crude estimate considers the put options used in bearish bets and the call options exclusively in neutral-to-bullish trades. Even so, this oversimplification disregards more complex investment strategies.
For example, a trader could have sold a put option, effectively gaining positive exposure to Bitcoin above a specific price, but unfortunately, there’s no easy way to estimate this effect.
A few more dips below $19,000 would not be surprising
Bitcoin bears need to push the price below $19,000 to secure an $80 million profit. On the other hand, the bulls’ best-case scenario requires a pump above $21,000 to flip the tables and score a $150 million gain.
Bitcoin bulls had $80 million in leveraged long positions liquidated on Oct. 12 and Oct. 13, so they should have less margin than is required to drive the price higher. Consequently, bears have higher odds of pinning BTC below $19,000 ahead of the Oct. 21 weekly options expiry.
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