Bears Set For $1B Options Expiry, While ETH Price Hovers Around $1,800

The performance of Ether (ETH) over the last three months has been less than satisfactory, with the altcoin testing the $1,800 support for the first time since July 2021 following a 50% decline since April 3.

Due to stock market instability, investors shifted towards the US dollar, and on May 13, the DXY index achieved its highest level in 20 years. 

Furthermore, on May 9, the 5-year U.S. Treasury yield hit its highest level since August 2018, trading at 3.10%, indicating that investors are looking for higher yields to compensate for inflation. In a nutshell, macroeconomic data indicate risk-averse investor sentiment, which helps to explain Ether’s decline.

A 7-block chain reorg on Ethereum’s Beacon Chain on May 25 added to the panic among Ether traders.

Due to a rival block receiving more support from network participants, a legal transaction sequence was knocked off the chain.

Fortunately, this is a typical occurrence, and it might have resulted from a resource-hungry miner or a flaw.

According to Coinglass statistics, leverage traders (longs) were the major victims of Ether’s 11% price fall, with $160 million in aggregate liquidations at derivatives exchanges.

Bulls Eye For $2,100 And Beyond

The open interest for Ether’s May monthly options expiry is $1.04 billion, but the final value will be substantially lower due to bulls’ overconfidence. Because their bets for the May 27 options expiry extend beyond $3000, these traders may have been tricked by the short-lived push to $2,950 on May 4th.

Bulls were surprised by the slide below $1,800 since virtually no call (purchase) options for May 27 had been put at that price.

The $540 million put (sell) open interest has a modest lead over the $505 million call (buy) options, as shown by the 0.94 call-to-put ratios. Nonetheless, with Ether trading at $1,800, any bullish investment is likely to be a losing proposition. 

None of the $505 million call options will be available if Ether’s price remains below $1,800 at 8:00 a.m.

UTC on May 27. This disparity occurs because a right to acquire Ether at $1,800 or greater on expiry is worthless if Ether trades below that price.

ETH Looks For $325 Million Profit

Based on the present price activity, the three most likely possibilities are listed below. The quantity of call (bull) and put (bear) options contracts available on May 27 varies depending on the expiry price. The theoretical profit is determined by the imbalance favoring either side.

  1. Between $1,600 and $1,700 : 230,000 puts vs. 0 calls. The overall result is $370 million in favor of the put (bear) instruments.
  2. Between $1700 and $1,800: 192,300 puts vs. 50 calls The total result is $325 million in favor of the bears
  3. Between $1,800 and $2,000 : 150,000 puts vs. 3,300 calls. The overall result is $280 million in favor of the put (bear) instruments.

In a nutshell, to make a $325 million profit, ether bearish must keep the price below $1,800 on May 27. The bulls’ best-case scenario, on the other hand, demands a rise above $1,800 to decrease the damage by $45 million.

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