Bitcoin (BTC) is about to experience its second-largest monthly options expiry of 2024, totaling $8.1 billion in aggregate exposure. The question is: will this be enough to fuel a robust rally toward $70,000, or are the bearish incentives too strong to ignore?
The current Macroeconomic environment favors risk-on assets, including Bitcoin and the Sept. 27 options expiry will be a pivotal event. The neutral-to-bullish options holders are well-positioned to capitalize if Bitcoin stays above $63,000. However, bears have enough motivation to curb this advantage by pushing Bitcoin’s price below $60,000. Thus, analyzing the options market's positioning and the potential net impact of the monthly expiry is crucial.
On Sept. 24, the Chinese stock market surged following the People's Bank of China’s (PBOC) announcement of plans to lower borrowing costs and inject liquidity into the economy, including reduced mortgage repayment programs. Additionally, the PBOC pledged $113.8 billion to support the stock market, including measures for share purchases and buybacks. Lynn Song, chief economist for Greater China at ING, commented, “There is still room for further easing in the months ahead,” according to Yahoo Finance.
Essentially, China has mirrored the more accommodative US monetary policy, which favors risk-on assets like Bitcoin. By stimulating economies and lowering interest rates, central banks are diminishing the appeal of fixed-income investments while fueling inflationary pressures. In such environments, scarce assets like Bitcoin tend to outperform, especially when the S&P 500 is less than 1% away from its recent all-time high, and home prices in the 20 largest US metro areas have risen 5.9% over the last 12 months, according to the Case-Shiller Index.
Given these favorable macroeconomic conditions, Bitcoin bulls have reason to believe the $63,000 level will hold until the Sept. 27 options expiration, and there might even be a push toward $65,000. However, to assess the likelihood of this bullish momentum, it is essential to examine how Bitcoin options traders are positioned ahead of the expiry.
Aggregate Sept. 27 Bitcoin options open interest, USD. Source: Laevitas.ch
From a broader perspective, Bitcoin call (buy) options, valued at $4.9 billion, are 53% larger than the $3.2 billion in open interest for put (sell) options. While this is not unusual—crypto traders often lean bullish—the excessive optimism reflected in bets on $90,000 and higher Bitcoin prices appears overly ambitious, especially with less than three days remaining before these options expire.
In fact, 55% of the call options are set at strike prices of $70,000 or higher, leaving $2.22 billion in notional value with a realistic chance of participating in the September monthly expiration. Similarly, 69% of put options are set at $56,000 or lower, making them likely to expire worthless, thus reducing the outstanding notional value to roughly $1 billion.
Bitcoin call (buy) options are well positioned, favoring bulls
Below are the four most likely scenarios based on current price trends. The availability of call and put options for the Sept. 27 expiration varies depending on Bitcoin’s settlement price at the time.
This rough estimate assumes that call options are predominantly used for bullish positions, while put options are used for neutral-to-bearish strategies. However, it’s important to note that this is a simplification and does not account for more complex investment tactics.
Related: Investment managers eye ‘extraordinary upside’ from BTC options debut
- Between $57,000 and $58,000: The net outcome favors the put (sell) options by $250 million.
- Between $58,000 and $60,000: The net result is expected to be roughly balanced between call and put options.
- Between $60,000 and $62,000: The net outcome favors the call (buy) options by $550 million.
- Between $62,000 and $64,000: The net result favors the call (buy) options by $1 billion.
Bears are under significant pressure to drive Bitcoin’s price below $60,000 before the September monthly expiry in order to avoid a scenario where call options benefit by $550 million. However, given the supportive macroeconomic conditions—including interest rate cuts by the US Federal Reserve and stimulus measures from China’s central bank—the odds seem to favor the Bitcoin bulls.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.