Ether (ETH), which entered a bullish channel earlier in the month, is currently moving towards the $3,800 mark. Despite recent turmoil, Ether bulls are poised to make a $53million profit when Friday’s weekly options expire.
Investors seem disinterested in Ether’s recent performance versus Bitcoin (BTC) and, to date the altcoin’s gains are at 265%. If Ether can maintain a price above $3,600 by Friday, then 99% of $180 million worth of put (sell) options will be lost.
Bitstamp price in USD for Ether Source: TradingView
The Ethereum smart contract competition continues to press the network. At the time of writing, Ethereum’s average gas fees are above $20. Polkadot (DOT), which will begin sidechain auctions on November 11, will support new token launches and decentralized finance applications (DeFi), as well as Internet of Things (IoT), solutions. All of these are going through trustless cross network bridges.
Binance Smart Chain announced this week plans to launch a $1B fund to increase adoption in the whole crypto industry. Potential incubation events that are backed by blockchain projects are usually interpreted as bullish for native assets. The BNB price has increased at least 30% since the announcement.
Bears didn’t expect prices higher than $3,300
Recent mildly negative newsflow makes it easy to see why bears bet 88% at $3,300 and lower. If bulls had been less greedy, they might have won Friday’s $365m expiry.
According to the long-to short ratio, Oct. 15’s expiry is perfectly balanced between put (sell) and call (buy) options. Depending on the expiry price, this birdseye view still needs more detail.
Ether Oct. 15 futures open interest. Source: Bybt
Both sides appear to have $180 million worth Ether options. This is evident by the 1.03 call/put ratio.
This metric is misleading because most bearish bets will be wiped out by the Ether rally. If Ether remains above $3500 at 8:00 UTC on Friday, then only $6.6million of the put (sell), options will be available.
Bulls feel at home at $3,600
A bear trap is any expiry price higher than $3,500. However, a $32,000,000 advantage shouldn’t be enough to cause serious damage. For perspective, Ether’s monthly options expiry has over $800 million of open interest.
These are the most likely scenarios based on the current price levels. The imbalance favoring one side is the theoretical profit from the expiry.
This data shows how many bulls (call) or bears (put) contracts will be available by Oct. 15.
Between $3,300 to $3,500: 7,450 call vs. 3,550 put. Bulls are favored by $13 Million. Between $3,500 to $3,600, 11,150 calls vs. 1,900 put. Bulls win by $32million. Between $3,600 & $3,800, 15,400 calls vs. 600 put. Bulls make $74 million more. Above $3,800, 27,450 calls are compared to 0 puts. Bulls profit $104 million.
This rough estimate includes call (buy), options that are used in bullish strategies, and put (sell), options that are only used in neutral-to bearish trades. A trader could also have sold a put option to gain Ether exposure above a certain price. Unfortunately, it’s not possible to quantify this effect.
To balance the scales, bears require sub-$3,500
Bulls make $104 million more when Ethereum trades above $3,800. This is $30 million more than the $74 million gain. The bears are able to make $61 million by lowering the price to $3,500.
The bull run is still going strong with just over a day to go before Oct. 15 expiry. Despite the challenges Ethereum network faces, and the high gas costs, investors’ demand to decentralized finance (DeFi), and NFTs seems to be sufficient to keep Ether uptrending.
Risk is inherent in every investment or trading move. Before making any investment or trading move, you should do your research.