The combined notional open interest in bitcoin BTC -0.77% and ether options listed on Deribit has reached an astounding $20 billion. This surge in interest in options signifies a growing market sophistication.
Deribit is set to settle monthly bitcoin and ether options worth several billion dollars, marking a significant event in the crypto options market.
The notional open interest, which represents the dollar value locked in active bitcoin and ether options contracts on Deribit, has risen to $20.64 billion. This figure is closely aligned with the peak observed on Nov. 9, 2021, when bitcoin was trading at a price over $66,000, which was 90% higher than the then market rate of $34,170. This means that the current open interest in terms of contract is considerably higher than what was seen in November 2021.
This not only represents a significant achievement for Deribit but also serves as a clear indicator of the broader market growth. It’s worth noting that Deribit controls a whopping 90% of the global crypto options activity.
Options are derivative contracts that grant the buyer the right, but not the obligation, to purchase or sell the underlying asset at a predetermined price on or before a specified date. A call option provides the right to buy, while a put option offers the right to sell. A buyer of a call option is generally bullish on the market, whereas a put buyer holds a bearish view.
The record activity in the options market indicates that flows tied to investors and market makers will play a more influential role in determining the spot market price. It was recently reported that market makers held a net short gamma exposure in bitcoin. This might have led them to buy the top cryptocurrency as its price increased, inadvertently accelerating its price rally. Bitcoin has seen a 30% increase in just two weeks, now trading above $34,000.
Bitcoin and ether options contracts valued at $4.5 billion are slated to expire on Deribit. Such monthly and quarterly settlements often introduce volatility into the crypto market.
The majority of the open interest in bitcoin is concentrated in ITM calls or those with strike prices below bitcoin’s current market rate. Over the past fortnight, traders have been actively buying calls as bitcoin’s price surged from $27,000 to $35,000.
A call option is considered in the money (ITM) when the current market price of the underlying asset is higher than the call option’s strike price. Conversely, a put is deemed ITM when the price of the underlying asset is lower than the put’s strike price.
Strijers highlighted that options worth $4.5 billion are set to expire on Friday. This high value, coupled with a significant percentage set to expire in the money (ITM) due to recent market movements, might trigger notable market action.
