Bitcoin faces $6 billion in options expiry risk

Imbalance between call and put options

The Deribit exchange dominates December Bitcoin options with a 92% market share, overseeing $5.5 billion in open interest. However, analysts expect the realized value at expiry to be much lower, as a significant part of these high-volume trades serve as hedges against extreme outcomes or are structured within neutral strategies.

A notable element drawing market attention is the sizeable $1.85 billion in open call options targeting $115,000 and above. Similarly, put options targeting prices below $55,000 comprise $1 billion in open interest. This suggests both buyers and sellers have taken equally aggressive bets on high-risk, low-probability market moves.

Premiums on put options are about 9% higher, indicating that professional traders remain cautious about potential declines in Bitcoin’s price.

According to Deribit’s data, the difference between call and put open interest is narrower than expected. While optimism is pronounced on the call side, hefty put positions reveal that the market expects sharp price swings in both directions.

Professional traders’ expectations

The options skew metric is closely watched to gauge how professionals perceive upward and downward price risks. Typically, this metric fluctuates between -6 and +6, but currently, puts are trading at a 9% premium to comparable calls.

This situation signals that investors see a moderate risk of a price downturn. Still, Bitcoin’s recent climb toward $80,000 has not sparked a dramatic shift in broader market sentiment.

Meanwhile, purchasing call options with a $120,000 strike remains relatively affordable. On May 7, Deribit quotes placed the premium for the right to buy one BTC at $120,000 or more at $2,202.

Simplified positioning on the horizon

This dynamic indicates that extreme price targets, both bullish and bearish, remain popular among market participants. Nearly half of open interest on both sides is tied to low-probability strategies. Analysts predict the volume of speculative trades may start to shrink as the year comes to a close.

Ultimately, the $1.85 billion in call option open interest cannot solely be explained by investor optimism. The overall spread of options suggests that a cautious approach still prevails for longer-term outlooks.