Bitcoin (BTC) has been attempting to break through the $20,500 resistance level for the past 35 days, with the most recent unsuccessful attempt occurring on October 6. Meanwhile, bears have demonstrated strength on four separate occasions after BTC tested levels below $18,500 during this period.
Investors remain uncertain about whether $18,200 is truly the bottom, as each test of this support level weakens its validity. This is why it is crucial for bulls to maintain momentum during this week’s $510 million options expiration.
The October 21 options expiry is particularly significant because Bitcoin bears could profit by $80 million if they push BTC below $19,000.
Bearish Bets Target $19,000 or Lower
The open interest for the October 21 expiry options stands at $510 million, but the actual figure is lower due to overly optimistic bearish positions. After BTC fell below $19,000 on October 13, these traders completely missed out on bearish bets targeting $17,500 and lower.
A put-to-call ratio of 0.77 indicates the dominance of $290 million in put (sell) open interest compared to $220 million in call (buy) options. Nevertheless, with Bitcoin hovering near $19,000, most of these bearish bets are likely to become worthless.
If Bitcoin’s price remains above $19,000 by 8:00 UTC on October 21, only 4% of these put options will be of any value. This discrepancy arises because the right to sell Bitcoin at $18,000 or $19,000 becomes useless if BTC is trading above those levels at expiration.
Bulls Could Still Turn the Tables with a $150 Million Profit
Based on current price movements, here are the four most likely scenarios for the October 21 expiry. The number of Bitcoin option contracts available for call (bull) and put (bear) instruments varies depending on the expiration price. The imbalance favoring each side represents the theoretical profit:
- Between $18,000 and $19,000: 0 calls vs. 4,300 puts. The net result favors put (bear) instruments by $80 million.
- Between $19,000 and $20,000: 1,500 calls vs. 1,100 puts. The outcome is balanced between calls and puts.
- Between $20,000 and $21,000: 4,300 calls vs. 100 puts. The net result favors call (bull) instruments by $85 million.
- Between $21,000 and $22,000: 7,200 calls vs. 0 puts. The net result favors call (bull) instruments by $150 million.
This simplified estimate considers put options used in bearish bets and call options dedicated to neutral-to-bullish strategies. However, it overlooks more complex trading approaches.
For example, a trader might have sold put options to effectively gain positive exposure to Bitcoin above a specific price, but there is no straightforward way to estimate the impact of such strategies.
Another Drop Below $19,000 Would Not Be Surprising
Bitcoin bears need to push the price below $19,000 to secure an $80 million profit. On the other hand, bulls need the price to exceed $21,000 to turn the situation around and gain $150 million.
Bitcoin bulls faced $80 million in liquidated leveraged long positions on October 12 and 13, which likely reduced their available margin—making it harder to push the price upward. As a result, bears have a higher probability of pinning BTC below $19,000 before the weekly options expiration on October 21.
Frequently Asked Questions
What caused Bitcoin to break above $21,000?
A combination of factors, including market sentiment, options expiry dynamics, and technical trading activity, contributed to this movement. Large option expiries often lead to increased volatility as traders adjust or close their positions.
How do options expiries influence Bitcoin’s price?
Options expiries can create significant price movements due to the concentration of open interest at specific strike prices. Traders may attempt to push the price toward levels that maximize their profitability, causing short-term volatility.
Is $18,200 a strong support level for Bitcoin?
While $18,200 has been tested multiple times, repeated tests can weaken support levels. Investors are watching closely to see if this level holds under further selling pressure.
What is the put-call ratio, and why is it important?
The put-call ratio measures the volume of put options relative to call options. A ratio below 1 indicates more call activity, which is generally bullish, while a ratio above 1 reflects bearish sentiment.
Can retail investors benefit from options trading strategies?
Yes, but options trading involves significant risk and requires a solid understanding of derivatives markets. Retail investors should educate themselves and consider their risk tolerance before participating.
Where can I learn more about advanced trading techniques?
👉 Explore professional trading strategies to deepen your understanding of market dynamics and risk management.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the official position of any affiliated entity. Every investment and trading move involves risk, and you should conduct your own research when making decisions.