Bitcoin Bulls are Ready to Defend the $13,000 Level

A total of 62,000 Bitcoin options will expire this Friday, and this equates to $830 million in open interest. These large numbers do not reflect the fact that 58% of these options are no longer worth anything.

As we approach the expiration date, the call options above the current level begin to devalue very quickly. It is not worth paying $20 for the opportunity to buy Bitcoin at $14,500 on Friday morning. Therefore, renewing the options for the next month is not very useful.

With less than 48 hours to go until October’s expiration, calls of $14,500 and above are unlikely. The same can be said for the $11,500 put options that are currently trading below $10 each.

Deribit leads the options market with a 70% share of the options that still have value. Currently, there are $134 million in call options from $11,500 to $13,500, accumulated against $45.5 million in put options from $12,500 to $14,500. Therefore, bulls favour bears by a ratio of 3 to 1.

Chicago Mercantile Exchange has a 26% market share among BTC options for October that still have value. Call options close to the current market level of $72 million, while put options are less than $1 million. This move is no different than expirations seen in the past, as CME options traders are often extremely bullish.

Therefore, there is currently a $160 million imbalance favouring bulls in the Bitcoin options markets. This is a relevant number considering that expiration occurs at a set time. 

Futures open interest generally falls near maturity

Many traders believe that the $5.4 billion open interest in Bitcoin futures also expires on Friday. Most of these contracts are perpetual (reverse swaps) or are set for a later date.

On this occasion, CME is leading with an open interest of $360 million for October. But this notion will be drastically reduced before expiration as traders move their positions for the next few months. As evidence of this move, CME’s remaining October open interest was reduced by $130 million yesterday.

No matter how big an investor’s profit or loss is, it is feasible to roll over the position for the next expiration. Unlike the options markets, futures contracts do not decrease near their last trading day.

The futures margin is adjusted daily, which means that the seller (short) pays the buyer (long) of the contract when Bitcoin is trading above the price. The opposite happens if the price of BTC closes below. Both parties can benefit from renewing their positions, provided there is sufficient margin to maintain it.