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The Bitcoin derivatives market is bracing for increased volatility due to the quarterly options expiring on Friday. A significant portion of the open positions on Deribit are in-the-money (ITM), which could lead to increased trading volume.
On Wednesday, several analysts noted that the Bitcoin options market is ready for rising volatility, with more than 20% of the open positions on Deribit set to expire in-the-money (ITM). Analysts predict that this situation could result in a significant increase in trading volume.
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Deribit CEO Luuk Strijers stated in an interview with a news outlet, “As the major quarterly expiry on Friday approaches, potentially influenced by the ‘quadruple witching’ and related volatility in U.S. markets, more than 20% of the open positions on Deribit are expected to expire in-the-money. This represents a total value of over $2.7 billion.” He also mentioned that the total value of options expiring on Friday exceeds $10 billion.
The simultaneous expiration of index futures, index options, stock options, and futures contracts at the end of each quarter triggers the event known as ‘quadruple witching’. This event typically leads to increased volatility and trading volume. The fact that a large portion of open Bitcoin positions on Deribit are in-the-money indicates a potential for significant trading activity as these contracts approach expiry.
Strijers observed a short-term bearish trend in the distribution of Bitcoin open positions and added, “Looking at the skew in options, a positive shift for Bitcoin is expected by July 12.”
In contrast, Michael Dunn, President of Bitnomial Exchange, noted that market participants have mostly rolled over their June futures contracts into July, maintaining their open positions and thus avoiding expiry. Dunn said, “This could indicate that traders are continuing to capitalize on higher prices further along the curve to lock in the basis. Typically, traders close these positions when the opportunity to capture higher future prices diminishes.”
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