Bitcoin Options Open Interest Hits Record High in Expiry Week

Sep 24, 2020 at 15:54 UTC.Open interest in bitcoin options has risen to new record highs this week.

A record $2.14 billion worth of options contracts were open on Tuesday, up nearly 53% from the multi-month low open interest of $1.14 billion back on Aug. 28, according to data source Skew.As of Wednesday, open interest was $2.03 billion.

Deribit, the world's largest crypto options exchange, contributed 75% or $1.6 billion of the total open interest of $2.11 billion on Tuesday.

"A trend higher in open interest amidst a backdrop of steady volume indicates the concentration of risk behind a specific theme/trade," said Vishal Shah, an options trader and founder of Polychain Capital-backed derivatives exchange Alpha5.

At press time, there were 89,100 options contracts with a notional value of over $1 billion set to expire on Friday across major exchanges - Deribit, CME, Bakkt, OKEx, LedgerX - according to data provided by the crypto derivatives research firm Skew.Some experts foresee the big expiry adding volatility to the spot price.

Traders often hedge exposure on loss-making options positions ahead of expiries, putting upward or downward pressure on prices in the spot market.

The maximum pain point is the price at which option buyers would lose the most money and option writers or sellers would profit the most.

Large institutions are generally net sellers of options and gain from pinning the spot price at the maximum pain point.

Bitcoin's options market is quite small compared to the spot market.

Bitcoin's options market saw a total trading volume of roughly $160 million on Wednesday.