Bitcoin has surged above $110,000, driven by renewed enthusiasm regarding U.S.-China trade dynamics. This uptick places BTC at a point where market makers might increase volatility ahead of Friday’s massive options expiration.
Analytics from the Deribit options market, monitored by Amberdata and Deribit Metrics, reveal that $13 billion in bitcoin options—both calls and puts—are set to expire this Friday. Notably, market makers and dealers are carrying negative gamma exposure at the $100,000 and $111,000 strike prices, indicating that they have written more options than they have purchased at these levels.
In such circumstances, market makers manage their risks by trading in alignment with market movements—buying when prices rise and selling when they fall—to keep net delta neutral.
As the expiration date approaches, their hedging actions generally escalate. This is due to the increase in gamma sensitivity as expiration nears, particularly for at-the-money (ATM) or near-the-money options at the $110K and $111K strikes.
The graph indicates that dealer gamma remains predominantly negative between $105,000 and $111,000, suggesting an increased likelihood of trading activity in this region.
Outside this range, gamma exposure shifts to net positive at $114,000.
Ultimately, bitcoin’s forthcoming major movement may hinge less on fundamentals and more on the mechanical hedging behaviors of options dealers.
