Bulls leave ship because an imbalance of US$93 million in Bitcoin options favors bears

US$540 million in open Bitcoin options will expire on Friday, and an imbalance of US$93 million shows that bears are taking control.

On December 11, a total of $540 million in open Bitcoin options (BTC) is set to expire. This number imitates the US$525 million options expiration of the previous month, since monthly and quarterly options usually concentrate the largest volume.

Although both dates have somewhat unusual activities, this time the bears seem to be in control. The data also shows that Bitcoin Loophole bulls seem to have become very optimistic.

Currently, the Deribit stock market holds 85% of the market until Friday’s maturity, with US$189 million in call (buy) options against US$282 million in put (sell) options. Even if the sale/purchase relation of 1,44 is favoring the lowest options, a more granular vision is necessary.
Bears were injured when BTC exceeded US$16,000

Traders tend to have short memories, but BTC had been trading below $16,000 for less than four weeks. Thus, many put options were bought around this level. This led to $120 million in open-ended put options between $15,000 and $17,000.

Put options on the BTC Deribit maturing on December 11.

Note how the chart above shows Deribit with a considerable amount of open contracts in a range that no longer makes sense after the most recent BTC price appreciation. Some of these options were previously traded for $365 each, such as the sale of $16,500 on November 28.

They are currently worth less than $25 each and will lose all of their value as we approach Friday’s maturity. Still, that doesn’t mean the bulls got the best part of the deal.

The bulls have made over-optimistic trades

This time, a decent volume of call options above $19,500 was traded. After failing to break the $19,800 resistance and later facing a drop below $18,000, the over-optimistic bulls ended up being the ones hurt.

To understand the result of this volatility, one must exclude options with little chance. By excluding put options below $17,500 and call options above $19,500, traders can get a more realistic view of current market conditions.

Deribit has 2,420 BTC call options ranging from $17,000 to $19,000. Bit.com has 320 BTC and OKEx currently has 140 BTC. Therefore, there is immediately $52 million in open contracts to support current levels.

Meanwhile, put options ranging from $17,500 to $19,500 total 6,870 BTC in Deribit, followed by 800 BTC in Bit.com – plus, there are another 290 BTC in OKEx. So the immediate pressure on the seller’s side comes to $145 million in open-ended put options contracts.

The reason behind this difference is that call options above US$19,500 have been depreciated and have no market value. This movement excludes 70% of the total of US$225 million in call options contracts.
BTC Deribit call options maturing on December 11.

The data above show how the bulls were extremely optimistic when buying options up to US$22,500. Many of these options are now considered useless, as signaled by their delta below 5%.

Therefore, when analyzing only the option bumps closest to market levels, there is a considerable imbalance of US$93 million favoring the selling side.

Despite recovering quickly from Tuesday’s low of US$17,640, these short-term options are favoring bears.

The weekly contracts of OKEx, Bit.com and Deribit expire on December 11 at 8am UTC.

The views and opinions expressed here are those of the author alone and do not necessarily reflect the views of the Cointelegraph. Every investment and trading movement involves risk. You should conduct your own research when making a decision.