What BTC quarterly options expiry means for the market

On March 27, the monthly and quarterly options expired, with a total of $13.4B in notional value for BTC contracts. The options expiry may affect the market over the coming weekend, as options traders reposition and signal their expectations of BTC. 

A total of 194,400 BTC contracts expired on March 27, for a larger than usual quarterly options event. The maximum pain levels are at $74,000, but the options repositioning may sway the spot market. 

The quarterly options expiry coincides with BTC weakness and relatively small price moves over the past week. BTC traded at $68,683.66, while ETH held above $2.062 as the market was still shaky.

BTC also traded with a sentiment of extreme fear, as options positioning also reflected a bearish trend. BTC is down 21.6% in the quarter to date, following its first consecutive losses in January and February, and 2.16% net gains in March to date.

Despite the bearish trading, options markets set new open interest records. Ahead of the quarterly expiry, Deribit carried near-peak open interest of $526B, up from $494B at the end of last quarter. 

Deribit showed peak open interest in November, as traders were repositioning in a market breaking down from its peak. Options trading accelerated and became essential as the BTC and ETH markets moved with increasing uncertainty. 

BTC options trend bearish

BTC options showed strong downside protection, with accumulated put options open interest at $60,000. Options traders signalled a worst case scenario, where BTC would break through that range. 

Overall, call options at a higher price range dominate put options. Traders signal a market recovery may be more secure above $70,000, with call options accumulating at $75,000. The Deribit market shows BTC may have a long trek to recover that price range, and bearish trading may continue.

Ahead of the expiration event, options traders also closed some of the positions and rolled over for the next most active period. Traders shifted to out-of-the-money call options for June and September, signalling an eventual hope for a recovery. 

ETH options expire below maximum pain levels

ETH options trading showed more subdued activity levels. On March 27, $2.12B in ETH optional interest expired, with a maximum pain at $2,250-$2,300. The maximum pain levels shifted after last-minute contract rollovers. 

The put/call ratio flipped to 1.10 in the past day, signalling immediate bearish shifts in positioning, as ETH sank closer to $2,000. Overall, ETH options trading remained slower, as fewer holders were seeking downside protection. 

ETH put options show attempts at downside protection at $1,750 per ETH. Call options have their biggest share of open interest at $2,500, signalling a price at which ETH is seen as more bullish. 

ETH is preparing to close Q1 with a loss of 30.55%, after two months in the red and a small 5% net gain in March.

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