Ethereum bulls hedge bets ahead of $ 250million ETH options expiration next week


Ether (ETH) paved the way for lower transaction costs with the Berlin upgrade on April 15. However, traders already know that the Ethereum 1559 improvement proposal is the most anticipated and controversial change planned for the next London hard fork.

The EIP introduces a base fee that will be burned when a transaction occurs, while miners are paid a tip to validate transactions. The move would put great pressure on miners’ incomes, but the proposal aims to tame the skyrocketing gas costs that have plagued the network over the past two years.

Recent rally and conflict with minors have spurred demand for protection options

The Berlin and London upgrades are needed to meet the non-inflationary issuance schedule, which underpins the network’s Eth 2.0 Proof of Stake (POS) Network. Thus, given the 153% cumulative gains in 2021, it is to be expected that investors will more actively use short-term options as a hedging instrument.

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Aggregate options from April 23 to ether. Source: Bybt

While the neutral to bullish call option offers the buyer price protection on the upside, the reverse occurs on more bearish puts (puts). By measuring the risk exposure of each price level, traders can gain insight into the positioning of bullish or bearish traders.

The total number of contracts due to expire on April 23 is 101,300, or $ 250 million at ETH’s price of $ 2,450. However, the bulls are apparently outnumbered, as call options only account for 35% of open interest.

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Bulls have slight advantage after recent rally

While the initial picture looks bearish, consider that puts (puts) under $ 2,000 are nearly worthless within eight days. A more balanced situation emerges when the 17,600 bearish contracts currently trading below $ 10 each are removed.

Neutral to bearish puts still dominate with 58% of the remaining 80,500 Ether contracts. Meanwhile, open interest stands at $ 197 million given the current price of Ether, giving bears a $ 30 million advantage.

The bears may have been caught off guard as Ether set a new all-time high near $ 2,500. A measly 6,600 Ether puts are left at $ 2,450 and up, only 10% of the total.

Meanwhile, neutral to bullish calls stand at 19,500 Ether contracts. This difference represents an open interest of $ 31 million in favor of the bulls. Although small, the bears would only take a similar lead if the price of Ether fell to $ 2,200 on April 23.

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It’s worth noting that $ 30 million is a big enough number to spur the 10% price move needed to bring Ether down to $ 2,200 and tip the scales in favor of bears.

This data suggests that the next April 23 expiration of $ 250 million in options will take place without much fuss.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of TBEN. Every investment and trading move involves risk. You need to do your own research when making a decision.