Key takeaways:
Bullish strategies dominate the $5 billion Ether options expiry, benefiting traders if prices increase.
Neutral-to-bearish strategies largely faltered below $4,600, leaving traders vulnerable as Ether surged in August.
The $5 billion Ether (ETH) options expiry on Friday could signify a pivotal moment for the cryptocurrency, with bullish strategies now more favorably positioned following a 22% ETH price increase over the previous 30 days. This event may fuel momentum to push Ether past $5,000, although investors are keeping an eye on Nvidia (NVDA) earnings anticipated this Wednesday.
With a current market capitalization of $557 billion, Ether ranks among the 30 largest tradable assets, surpassing major firms like Mastercard (MA) and Exxon Mobil (XOM). While there is discussion around comparing Ether to stocks, its historical correlation with the S&P 500 indicates that traders evaluate both asset classes similarly.
ETH/USD vs. S&P 500 Index 40-day rolling correlation. Source: TradingView / Cointelegraph
A correlation exceeding 80% implies Ether’s price has closely mirrored the movements of the S&P 500, although the relationship briefly reversed during a two-week period in late July. Thus, Ether traders should stay alert to corporate earnings, especially within the artificial intelligence sector, which has significantly influenced the stock market index.
Ether call (buy) options carry $2.75 billion in open interest, 22% higher than the $2.25 billion in put (sell) contracts, but the outcome of the expiry relies on ETH’s price at 8:00 am UTC on Friday. Deribit leads the ETH options market with a 65% share, followed by OKX at 13% and CME with 8%, making insights from the primary exchange crucial.
Bearish Ether strategies ill-prepared for $4,000 and above
Ether bears were taken by surprise when ETH surged earlier in August, as most bearish bets were set below $4,000. Despite facing resistance at $4,800, traders with bullish strategies are well positioned to gain from the $5 billion monthly expiry.
Deribit ETH options open interest for Friday. Source: Deribit
Only 6% of ETH put options were placed at $4,600 or higher, rendering most neutral-to-bearish structures effectively irrelevant. Conversely, 71% of call options were concentrated at $4,600 or lower, with significant clusters at $4,400 and $4,500. As a result, bulls are expected to continue supporting Ether’s price leading up to the monthly expiry.
Related: Ethereum‘s best month ever puts $7K ETH price within reach
Below are four potential scenarios at Deribit based on current price dynamics. These estimates provide theoretical profits derived from open interest imbalances but do not include complex strategies, such as selling call options for downside price exposure.
Between $4,050 and $4,350: $820 million in calls (buy) vs. $260 million in puts (sell). The net result favors the call instruments by $560 million.
Between $4,350 and $4,550: $1.05 billion calls vs. $140 million puts, favoring calls by $915 million.
Between $4,550 and $4,850: $1.4 billion calls vs. $45 million puts, favoring calls by $1.35 billion.
Between $4,850 and $5,200: $1.82 billion calls vs. $2 million puts, favoring calls by $1.8 billion.
Ether bulls are likely to be very satisfied post the monthly options expiry, even if ETH pulls back to $4,400. Although breaking above $5,000 in the coming weeks is plausible, this will likely hinge on trader sentiment after the Nvidia earnings report and their overall evaluation of global economic growth risks.
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.
