Key Market Dynamics
According to Skew Analytics, over 55,000 Bitcoin options contracts valued at $2.2 billion will expire at 4:00 AM EST on May 28. Despite Bitcoin's volatile two-week "rollercoaster," the crypto market has shown stronger resilience compared to pandemic-era sell-offs, with analysts predicting continued upward momentum.
Dominant Players in BTC Options
Deribit holds the majority of Bitcoin options contracts, followed by LedgerX, OKX, and CME in open interest. This Friday, Deribit will see:
- 48,469 BTC options ($1.95 billion)
- 307,558 ETH options ($877 million) expire.
Open interest across all expiries halved to $6.5 billion in the two weeks ending May 23.
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The "Maximum Pain" Phenomenon
Deribit identifies the maximum pain point for Bitcoin options at **$50,000**—25% above the current $39,000 price. Some investors speculate this will trigger pre-settlement price surges toward $50,000, as observed in past expiries (e.g., Bitcoin’s $4,000 rebound to $54,000 before April’s expiry).
How Maximum Pain Works
- Definition: The price at which option buyers incur maximal losses while sellers gain maximally.
- Calculation: Based on aggregate open positions for a given expiry.
- Example: In March, Bitcoin dropped from $60,000 to $50,000 pre-expiry, narrowing the gap vs. the $40,000 pain point before rebounding sharply.
Market Indicators Suggest Recovery
- Contango returns: Far-month contracts now trade above spot prices, with annualized yields at 8.5% (BTC) and 10% (ETH).
- Funding rates turn positive, and Deribit’s Bitcoin Volatility Index (DVOL) drops to 110–115.
ETH Options Signal Volatility Ahead
Deribit Insights noted muted BTC activity but rising ETH options flow, with large "strangle" buyers positioning for volatility:
- Strangle strategy: Simultaneously buying out-of-the-money calls and puts with different strike prices.
- Skew Analytics adds that ETH volatility mirrors 2017 bull-market levels.
Why This Expiry May Differ
- Smaller scale: $2.2 billion vs. $6 billion in March and $4 billion in April.
- Limited impact expected, though exchange outflows could support price recovery.
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FAQ Section
Q1: What is the maximum pain point in options trading?
A: It’s the price where option buyers collectively suffer the greatest losses at expiry, calculated from total open interest.
Q2: How does Contango affect crypto markets?
A: Contango (higher futures prices than spot) suggests bullish sentiment, often accompanied by positive funding rates.
Q3: Why are ETH options attracting attention?
A: Unusual strangle buying and volatility spikes hint at traders anticipating major price swings.
Q4: Will this options expiry trigger a Bitcoin rally?
A: While the $50,000 pain point could incentivize upward pressure, the smaller contract size may dampen its impact versus past expiries.
Q5: What’s driving crypto exchange outflows?
A: Investors may be moving assets to cold storage or decentralized platforms amid regulatory uncertainty or for long-term holding.
Disclaimer: This content is for informational purposes only and does not constitute investment advice. Conduct independent research and consult financial advisors before trading.