Bitcoin options are financial contracts that give traders the right—but not the obligation—to buy (call options) or sell (put options) Bitcoin at a predetermined price (strike price) by a specific date (expiry date).
These contracts allow traders to speculate on Bitcoin’s future price or hedge against potential losses without needing to directly hold Bitcoin (BTC).
For instance, if a trader purchases a call option with a strike price of $90,000, they can buy Bitcoin at this price even if the market price exceeds it, such as at $96,000. This gives the trader the opportunity to buy Bitcoin at a lower price, realizing a profit if they sell it at the current market price.
Conversely, a put option allows the trader to sell Bitcoin at the strike price, even if the market price falls below it. For example, if the strike price is $85,000 and the market price drops to $80,000, the trader can still sell Bitcoin at the higher strike price, securing a profit from the price difference.
The Importance of Options Expiry Dates
Options contracts have a fixed expiry date. At this point, traders must decide whether to exercise their options or let them expire worthless.
The expiry of a large volume of options contracts often leads to significant market activity, as traders adjust their positions. This can create volatility—a sharp rise or fall in Bitcoin’s price.
Let’s consider an example:
Suppose $1 billion worth of Bitcoin options are set to expire. If the majority of these are call options with a strike price of $90,000 and Bitcoin’s market price is $96,000, these options are likely to be exercised.
Since the strike price is below the current market price, traders holding these options would profit from exercising them. This could lead to increased demand for Bitcoin as traders look to buy it at the lower strike price.
However, if the market price is $85,000, the options might expire worthless. With the strike price above the current market price, it would be uneconomical for traders to exercise the options, and they might choose not to do so, leading to less market activity related to those options.
How Bitcoin Options Expiry Impacts the Market
Here’s how Bitcoin options expiry impact the market:
Price volatility: The period leading up to an options expiry often sees heightened market activity as traders close or roll over positions. This can lead to sudden price swings.
Example: If many call options are “in the money” (market price above the strike price), traders might buy Bitcoin to hedge their positions, pushing prices up. Conversely, a high volume of “out of the money” options (market price below the strike price) might reduce buying pressure.
Market sentiment: The ratio of call options to put options can provide insight into market sentiment. A higher number of call options suggests bullish sentiment, while more put options indicate bearish expectations.
Max pain theory: This concept predicts that Bitcoin’s price will gravitate towards the “max pain” price at expiry—the price level where the most options expire worthless. While not always accurate, this theory helps traders anticipate potential price movements.
Spotlight on December 27 Expiry: What Will Happen When Options Expire?
The upcoming Dec. 27 expiry (scheduled at 8:00 am UTC) is set to be a pivotal moment for the Bitcoin market, with nearly $11.8 billion worth of options contracts scheduled to expire. Here’s what traders should note:
Understand Open Interest
Open interest represents the total number of outstanding options contracts that have not yet been exercised, expired, or been closed out. It essentially shows how much activity and money is currently “tied up” in these options contracts.
Here are some of the observations based on CoinGlass’s chart below:
The chart’s horizontal X-axis displays options contract expiry dates, such as “241227” representing December 27, 2024. The left vertical Y-axis indicates open interest, typically the number of contracts.
Bitcoin Options Expiry | Source: CoinGlass
Green/teal bars represent call option open interest, with taller bars signifying more open call contracts for that expiry. Red bars show put option open interest, where taller bars indicate more open put contracts. The right vertical Y-axis shows the notional value, the total value of the Bitcoin underlying these options.
Significant activity around Dec 27: There’s a very large spike in both call and put open interest around this date. This suggests a lot of traders are anticipating a significant price move (either up or down) around this time. The higher volume of calls suggests a slight bullish bias for this date.
Smaller spikes at later dates: There are smaller spikes in open interest at later expiry dates, indicating continued, albeit less intense, speculation about future price movements.
What it Means for Bulls and Bears
Bulls (Optimistic about price rising):
Dominance of calls: The chart shows a significant amount of call options, especially peaking on Dec. 27. This indicates strong bullish sentiment, as traders expect the price to rise significantly by this expiry.
High notional value: The gray line peaks alongside call options, signifying a large amount of capital supporting bullish positions. This reflects confidence among bulls about future price movements.
Focus on long-term expiries: The concentration of open interest in December 2024 and March 2025 expiries suggests that bulls are not just optimistic about short-term price increases but also about sustained upward momentum over time.
Market value skewed toward calls: The market value for calls surpasses puts, underlining bullish dominance and trader belief in upward price trajectories.
Bears (Pessimistic about price falling):
Presence of puts: Although calls dominate, there is noticeable open interest in puts, especially around Dec. 27. This indicates that some bears are still hedging or betting on a price decline despite the bullish trend.
Hedging against downside risks: The presence of puts suggests that some traders are cautious and protecting themselves against potential market downturns, even if they are in the minority.
Lower overall notional value: The lower market value and volume of puts compared to calls indicate that bears are less confident or less committed to their downside bets, reflecting weaker sentiment compared to bulls.
Opportunities for bears: If unexpected market events or volatility arise, the smaller number of puts could position bears to capitalize on price drops if bullish sentiment reverses.
Major Players in Bitcoin Options
Platforms like Deribit, CME, and Binance dominate the Bitcoin options market. Deribit, for example, holds over 70% of the market share.
These platforms’ data—such as open interest (the number of active contracts) and call-put ratios—serve as valuable indicators for traders.
Only 5 days left until the 27 Dec Year-End Expiry.
BTC Options: USD 13.95 billion out of USD 31.93 billion (44%)
ETH Options: USD 3.77 billion out of USD 7.50 billion (50%)
Total Platform OI: USD 43.02 billion, marking a new all-time high!
If you are a BTC trader, you should focus on the below things:
Strike prices and open interest: Identify the most popular strike prices and the volume of contracts tied to these levels. High open interest at specific strike prices can act as psychological support or resistance levels.
Example: If there is significant open interest at a $60,000 strike price, Bitcoin’s price might hover around this level as expiry approaches.
Call-put skew: This metric reflects the difference in implied volatility between call and put options. A positive skew suggests traders are leaning towards bullish positions, while a negative skew indicates bearish sentiment.
Conclusion
Bitcoin options expiry is a significant event that can influence price trends and market sentiment. While it offers opportunities for profit, it also carries risks, especially for inexperienced traders.
By understanding the basics and keeping an eye on market data, traders can better navigate the complexities of Bitcoin options and make informed decisions.
FAQs
What happens to Bitcoin’s price when a large number of options expire?
When options expire, especially calls, it can lead to increased volatility, either causing selling pressure if traders exercise at higher prices or further price increases if demand remains strong.
How do Bitcoin futures funding rates affect price movements during options expiry?
A positive futures funding rate indicates that spot market demand is driving the rally, supporting Bitcoin’s price even as open interest increases, making a price dip less likely.
What is the significance of high-strike price options, like $100,000, during expiry?
High-strike price calls could trigger selling pressure as traders exercise their options to buy Bitcoin at a discount and sell for profit, potentially affecting short-term price stability.
Why are put options mostly out of the money, and what does this mean for bears?
With 98% of put options out of the money, bearish traders are not profiting as expected. This highlights a market sentiment more favorable to bulls, making it harder for bears to profit in the near term.
Disclaimer:
The information provided in this article is for informational purposes only. It is not intended to be, nor should it be construed as, financial advice. We do not make any warranties regarding the completeness, reliability, or accuracy of this information. All investments involve risk, and past performance does not guarantee future results. We recommend consulting a financial advisor before making any investment decisions.
Dr. Guneet Kaur is a senior editor at CCN.com and a Science Fellow at Exponential Science. She is a fintech and blockchain expert with extensive experience in digital finance education, blockchain ecosystems, and cryptocurrency markets. She has worked with global media such as Cointelegraph, as well as education and blockchain platforms, to design and lead strategic content and learning initiatives. As an educator and assessor for top-tier executive programs, she bridges real-world fintech trends with academic insight.
Dr. Kaur is also a published researcher and peer reviewer across fintech and data science journals, including Financial Innovation Journal and International Journal of Big Data Intelligence and Applications. Her work spans data-driven analysis, Web3 innovation, and technical content development. With a strong foundation in both industry and academia, she translates complex financial technologies into practical applications, empowering learners, professionals, and institutions across the rapidly evolving digital finance landscape.
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