$540 million in open interest on Bitcoin options will expire this Friday, and a $93 million imbalance shows that the bearishers are taking control.

On Dec. 11, a total of $540 million in open interest on Bitcoin options (BTC) will expire. This number mimics last month’s $525 million expiration of options, as monthly and quarterly options tend to account for most of the volume.

Although both dates show somewhat unusual activity, this time around, the bearishers seem to be in control. The data also shows that Bitcoin’s bulls seem to have become overly optimistic.

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Currently, the Deribit exchange has an 85% market share for this Friday’s expiration, with USD 189 million in call options versus USD 282 million in put options. Although the sell/buy ratio of 1.44 favors the more bearish options, we need to analyze this data in more detail.

Bearishers were injured when BTC broke through the USD 16,000

Traders tend to have a very short memory, but BTC was trading below USD 16,000 less than four weeks ago. Therefore, many put options were bought near that level. This has led to an open put interest of $120 million between the levels of $15,000 and $17,000.
BTC put options on Deribit for the December 11th expiration

Note how the above chart shows that Deribit has a significant open interest in a range that no longer makes sense after the most recent rise in the BTC price. Some of these options previously changed hands for USD 365 each, such as put options near USD 16,500 for the November 28th maturity.

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Currently these options are worth less than $25 each and will lose all their value as we approach Friday’s expiration. Still, this doesn’t mean that the sellers got the best end of the deal.
Bullish bought overly optimistic call options

This time, a decent volume of call options has been traded above USD 19,500. After failing to overcome the USD 19,800 resistance and after falling below USD 18,000, the most optimistic bullish side ended up being the ones that got hurt.

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To understand the result of this volatility, it is necessary to exclude the options with less probabilities. By excluding put options below USD 17,500 and call options above USD 19,500, traders can gain a more realistic perspective of current market conditions.

Deribit has 2,420 BTC call options ranging from USD 17,000 to USD 19,000. Bit.com has 320 BTC and OKEx currently has 140 BTC. Therefore, there’s an immediate open interest of $52 million that supports current levels.

Meanwhile, put options ranging from USD 17,500 to USD 19,500 amount to 6,870 BTC at Deribit, followed by 800 BTC at Bit.com; in addition, there are another 290 BTC at OKEx. Therefore, immediate pressure from the sell side amounts to USD 145 million of open interest in put options.

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The reason behind this discrepancy is that call options above $19,500 were devalued and are currently worthless in the market. This movement excludes the 70% open interest total of $225 million in call options.
BTC call options on Deribit for the December 11 expiration.

The above data shows how extremely optimistic the bulls became when they bought call options of up to USD 22,500. Most of those options are now considered worthless, as indicated by their delta below 5%.

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Therefore, when only the strikes (exercise prices) of options closer to market levels are analyzed, there is a considerable imbalance of USD 93 million that favors the sales side.

Despite rapidly rebounding from Tuesday’s low of USD 17,640, these short term options are currently favoring the bearish side.

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