Ethereum outperforms Bitcoin in options trading. A high put/call ratio is bearish for Ethereum. ETH prices are cooling off, after hitting a seven-month high.
A large number of Bitcoin and Ethereum options contracts are about to expire. This often causes volatility in the prices of the underlying assets. There is a significant shift in derivatives trading activity, with Ethereum options trading outpacing Bitcoin.
In relation to this, Industry analyst Colin Wu commented, via tweet, on the massive shift in derivatives trading, as follows:
“37,000 BTC options are about to expire with a Put Call Ratio of 0.51, a max pain point of $28,000, and a notional value of $1.05 billion. 256,000 ETH options are about to expire, with a Put Call Ratio of 1.09, a max pain point of $1,800, and a notional value of $4.8 billion. The Shanghai upgrade is coming, and the trading of Ethereum options has surpassed that of Bitcoin for the first time in more than a month.”
Ethereum Options Expiration
Ethereum options are derivatives contracts that allow traders to speculate on the price of ETH, as well as to buy or sell Ethereum at a specific price, the strike price, on a certain expiration date. They are also more flexible than futures that have fixed expiration dates.
As CoinDesk noted a week ago, investors use options to hedge their positions in the spot or futures market, to counter adverse price movements, as well as to speculate on future trends in valuations and volatility. According to Deribit, Ethereum’s open interest (OI) stands at almost 2.6 million open contracts that have yet to be settled.
Moreover, there is a put/call ratio of 1.09 for Ethereum. The put/call ratio is calculated by dividing the number of put options traded by the number of calls (long) option contracts traded. A figure above 1 is bearish, as more traders buy more short contracts than long ones. The critical point for Ethereum options is $1,800, which describes the strike price with the most open contracts. In addition, it is the price at which the asset would cause financial losses to the largest number of option holders at expiration.
For Bitcoin options, the picture looks a bit more bullish, with a put/call ratio of 0.51, suggesting that more long contracts are being bought than short contracts. On the other hand, the critical price of BTC is $28,000, quite close to where the asset is currently trading.
Crypto Market Outlook
Cryptocurrency markets have been flat on the day, with total capitalization hovering around $1.2 trillion. In addition, there has been very little movement in the top 10 cryptocurrencies, apart from Dogecoin (DOGE), which has lost 8.6%, after the traditional Elon Musk Twitter effect.
It should be remembered that, in recent days, Twitter changed its usual logo to that of Dogecoin’s Shiba Inu and, as on previous occasions, this generated an increase in the price of DOGE.
Ethereum is currently trading at $1,870, cooling off from midweek when it hit a seven-month high of $1,920. More downward pressure is likely to be added, as all of those Ethereum options contracts begin to expire this month.
By Audy Castaneda
