Traders Brace For $5 bn BTC, ETH Options Expiry
On 29th September, 1.217 million bitcoin and ether options contracts worth $4.8 billion will expire on Deribit. 117,000 of these contracts are tied to bitcoin, while the rest are ether options. Options are derivatives that give purchasers the right to buy or sell the underlying at a predetermined price. The value of these contracts depends on the top two cryptocurrencies’ trade by the end of the week.
Traders and investors monitor monthly and quarterly options expiries to influence markets. Max pain is the point where options buyers lose the most money, and sellers aim to keep prices near it to inflict maximum pain on buyers. They do this by buying and selling the underlying asset in spot/futures markets. Quarterly settlements are also important due to hedging activities of market makers or entities responsible for creating liquidity in an order book.
(With inputs from Shikha Singh)
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