Is Ethereum Options in Line for a Pullback?

By May 16, 2020Ethereum
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Launched in 2015, Ethereum is known as an open-source software platform based on blockchain technology. Considered to be the world's largest altcoin, Ethereum has a market capitalization of $22 billion. Since the beginning of this month, it has lost 13 percent of its value and is currently at the $ 200 tipping point. With the next few months being key for both altcoin and cryptocurrency markets, price movements should be viewed through a dynamic lens rather than a static point.

Market Analysis

Examining the dynamic derivatives market for altcoin, a pullback appears imminent. Ethereum Option contracts, traded on the Panama-based Deribit exchange, reached the highest point of open and active positions on the exchange in ETH terms. Although the US equivalent Open Interest Rate is lower than ATH, the Ethereum amount is obviously not.

This situation indicates that traders are opening more positions on the exchange than in the past, measured by the number of Ether contracts rather than the resultant dollar equivalent.

Imminent Developments

However, on May 15, 2020, the ATH will be undone. On that date, 49,500 Ethereum contracts are expected to expire, the fourth-highest one-day expiration term for Ethereum Option contracts. This event will undoubtedly reduce Open Interest. Since April 2019, there have been seven such pullbacks, with the three most significant dates being June 28, September 27, and December 27. The most recent pullback was on April 24, 2020.

With this large number of simultaneously expiring contracts, causing a pullback and a decline below the ATH level, the importance depends on the strike price and the type of aforementioned contracts. In terms of strike price, the largest contract could be as low as $ 60 with a volume of 34,300, suggesting that traders are opening contracts at $140 lower than the current price. To balance, albeit poorly, 23,600 contracts cost $ 240.

Looking at the current calls-to-puts, the former outweighs the latter. The call Options contracts, or the right to buy contracts, occupy four of the five contracts spots, with the most volume or the most traded in the market. Moreover, the highest traded contract [739 ETH in volume] is priced at impressive $800 with a Christmas 2020 expiration.

With an expected price cut later in the day, strike prices are expected to fall, but calls-to-puts are predicted to increase.

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