Friday’s $540M Ethereum options expiry favors traders with targets at $5K

The Ether (ETH), bulls are likely very happy with the 368% gains so far in 2021. It seems like there isn’t a day that passes without the altcoin hitting a new all time high.

Even though Ether is on its way to $5,000, there are still concerns about the network’s ability to absorb the high demand from the non-fungible token sector (NFT), and decentralized finance (DeFi).

The United States Treasury report on stabilitycoin regulation, released Nov 1, is another potential setback. This report emphasized the need for Congress to ensure that federal prudential oversight is consistent and comprehensive.

Additionally, other networks that offer interoperability to major DeFi projects are gaining acceptance, both in total worth locked (TVL), and market share for smart contracts. Solana (SOL), for example, reached a $236 record this week, surpassing Cardano ADA to become the fourth largest cryptocurrency.

CryptoSlam data shows that secondary sales of Solana NFT market markets have reached $495M over the past three month. However, the Ethereum blockchain is still the most popular with NFT secondary sales exceeding $1.76 Billion in October, according to CryptoSlam.

Coinbase price in USD for Ether Source: TradingView

Ethereum is a leader in the cryptocurrency market. It has attracted some big investors by its ability to keep ahead of the rest and create a pathway to solving the scaling problem through migration to a proof-of-stake network. These include Mark Cuban, owner of the Dallas Mavericks, Barry Sternlicht, billionaire, and Houston Firefighters Relief and Retirement Fund.

Although the November 5th expiry of $540 million Ether options may seem like a clear victory for bulls’, it wasn’t a few weeks ago.

Ether options combine open interest for Nov. Source: Bybt

The weekly expiry is dominated by the $300 billion put (sell), options, 20% more than the $240,000,000 calls (buy), instruments. Despite this, the 0.80 ratio call-to-put is misleading as the recent rally will likely wipe most bearish bets out.

If Ether’s price is above $4,500 on Nov 5, then only $1.5million worth of the put (sell) options will remain available at expiry. If Ether is trading at above $4,500, a right to buy Ether at $4,000.50 has no value.

Bulls feel at home above $4,500

Here are the top four scenarios that could result in the Nov. 5 $540 million expiry. The theoretical profit is the ratio of each side to the other. The expiry price determines the amount of active call (buy) or put (sell) contracts.

Between $4,300 to $4,400: 6,870 call vs. 6700 puts. The net result is balanced between bears and bulls. Between $4,400 to $4,600: 13,750 call vs. 350 put. The net result favors the bull call instrument. Between $4,600 and $4.700, 18,500 calls vs. fifty puts. The net result favors the bull call instruments by $85 million. Above $4,700: 22,800 calls against 0 puts. Bulls are in complete control, making $107 million profit.

This rough estimate includes call options used in bullish bets, and put options only in neutral-to bearish trades. This simplifies investment strategies that are more complicated.

A trader might have sold a put option to gain exposure to Bitcoin at a higher price. Unfortunately, it’s not possible to accurately estimate the effect.

To reduce their losses, bears require a price correction of 6%

Bears can avoid losing Ether on Friday’s expiry by lowering Ether prices below $4,400 on November 5, which is 6% lower than the current $4,660. Bulls will likely profit $85 million or more if there are no worrying news or events before the weekly options deadline.

Also, traders must consider that sellers often need to exert a lot of effort to affect the price during bull runs. This is usually inefficient and costly. Options markets data currently point to a significant advantage from call (buy), fueling bullish bets on Ether and increasing expectations of a rally up to $5,000

Risk is inherent in every investment or trading move. Before making any investment or trading move, you should do your research.

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Eileen Wilson

Eileen Wilson –Technology and Energy My Name is Eileen Wilson with more than 5 years of experience in the Stock market industry, I am energetic about Technology news, started my career as an author then, later climbing my way up towards success into senior positions. I can consider myself as the backbone behind the success and growth of with a dream to expand the reach out of the industry on a global scale. I am also a contributor and an editor of the Technology and Energy category. I experienced a critical analysis of companies and extracted the most noteworthy information for our vibrant investor network.

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