The expiration of futures and options on May 28 could be a turning point for Ether (ETH) as the cryptocurrency jumped 60% from its low of $1,730 on May 23. Even if the open interest rate is $6.2 billion, only 16% will expire. Friday, when most action takes place on permanent contracts and June contracts.
Options expiration should be considered, as this can lead to a balance of power. This is not the case in the futures markets, where buying (buyers) and selling (sellers) overlap all the time.
Options are divided into two independent parts: Call (Buy) options, which are often used for bullish-neutral strategies, and neutral bearish (Put) options.
Although long and short positions in Ether futures are always the same, the options markets give a clear indication of which side to take advantage of.
Coinbase Ethereum Price, USD Source: TradingView
Open interest rate for Ether futures contract decreased after correction
The sustained decline that started after a record high of $4,380 on May 12 took 11 days and eventually reached $1,730. However, the lower price was short-lived, and Ether quickly reclaimed the $2,400 support. Open interest rates in futures contracts were reduced by 54% to $5.2 billion as long positions were exploited and short sellers made a profit.
As for the $980 million Ether futures contract expiring on Friday, the crypto exchange leads Huobi with open interest of $300 million. CME followed closely. However, CME traders have traditionally shifted most positions in the last two trading days, so this number can be significantly reduced as the deadline approaches.
Interest rates on futures opened on May 28. Source: Huobi, CME, OKEx, Deribit, BitMEX.
At first glance, options seem to favor neutral bullish calls.
On the expiration date of May 28, there are 189,000 long options on ether versus 153,900 short options. This initial analysis provides 23% lead for neutral bullish calls. However, it must be kept in mind that the right to buy ether at $3,200 or more in less than 16 hours is not particularly desirable now.
The same can be said for ultra-low call options at $2,300 or less. To properly analyze the potential stress from Friday’s ending, both parties must be ruled out.
Note that $ 3,000 is a critical level for the Bulls, as 30,700 calls are piled there for 15,000 combinations. This means that if the bears manage to hold Ether below this price, the call options from neutral to bullish will be 54,500 ETH, equivalent to $150 million.
Meanwhile, neutral bearish put options at $3,000 and above 52,700 ETH, which is $145 million in open interest. This results in a balanced outlet force of the alternators.
The bulls have little incentive to push the price above $3,000.
If the bulls choose to show strength by raising the price above $3,000, the difference will turn into 45,700 ETH contracts worth $125 million. Although important, it is probably not enough to increase the price.
Futures traders were less optimistic after Cointelegraph on May 24 reported the latest major liquidation. When it comes to options, balance and pressure seem to be balanced at today’s level and it should come as no surprise on Friday.
Huobi, OKEx, and Deribit expire on May 28 at 8:00 UTC. CME futures and options appear shortly thereafter at 15:00 UTC.