5.4 billion USD worth of Bitcoin and Ethereum options are expiring today. Why are traders "risking it all" to double down on shorting volatility?

At 16:00 Beijing time today, Bitcoin (Bitcoin) and Ethereum (Ethereum) options with a total value exceeding $5.4 billion will expire on the Deribit exchange. Despite analysts warning that market structure is fragile and signaling a “late cycle” phase, traders continue to short volatility and employ complex strategies to manage risk.

Currently, Bitcoin’s maximum pain price is at $107,000, while Ethereum defensively hovers near the $3,800 support level. With a large concentration of open interest near key strike prices, this massive expiration could trigger significant market volatility, testing the conviction of both bulls and bears.

The staggering scale of the options market: over $5.4 billion at stake

The options expiring on Deribit today amount to an astonishing $5.4 billion, including a substantial number of Bitcoin and Ethereum contracts. When the market price stays around $102,159, a large open interest is concentrated at critical strike prices, indicating a high risk of volatility as settlement approaches.

This large expiration coincides with a sensitive period when analysts have been repeatedly signaling structural fragility and potential end-of-cycle signals. Yet, despite the increased risk, many traders are actively shorting volatility, attempting to hedge and manage their spot exposure through sophisticated options combinations.

Bitcoin options landscape: a key battleground amid cautious optimism

Changes in Bitcoin options positions show that after dropping below $100,000, market sentiment has turned cautious.

According to Deribit data, Bitcoin’s maximum pain price is at $107,000. The maximum pain point is the strike where option sellers (typically institutions and market makers) stand to make the most profit, while buyers suffer the greatest loss. If the price settles near this point, many call and put options will expire worthless, benefiting the option writers.

• Put-to-Call Ratio (PCR): currently at 0.79, indicating a slightly bullish sentiment or at least a cautious outlook that the market won’t crash dramatically.
• Open interest distribution: major concentrations are near $100,000 puts and between $120,000 and $125,000 calls. These are the critical levels for the upcoming battle between bulls and bears.
• Total open interest: 45,802 contracts, with calls (25,570) exceeding puts (20,233), representing an implied notional value of over $4.6 billion, underscoring the importance of this expiration.

Bitcoin’s price holding above $100,000 suggests traders are actively hedging rather than panicking, maintaining a cautious optimism about future movement.

Ethereum maintains a defensive stance: balanced yet cautious

Similar to Bitcoin, Ethereum options also reflect a defensive posture. At the time of writing, ETH trades near $3,347, with its maximum pain close to $3,800.

• Put-to-Call Ratio (PCR): approximately 0.94, slightly below 1, indicating a balanced but defensive positioning.
• Open interest distribution: mainly centered around $3,500 puts and $4,200 calls, key levels influencing Ethereum’s near-term direction.
• Trading strategies: traders favor defensive structures such as calendar spreads, diagonal spreads, risk reversals, and straddles. These aim to preserve upside exposure while preventing large downside moves, reflecting market caution and hedging against high volatility. The total notional open interest for Ethereum is about $716.85 million.

(Why are traders so determined to “short volatility” at all costs?

Despite repeated warnings from analysts like Greeks.live about potential cycle endings and structural crises, many traders continue to aggressively sell options, maintaining short volatility positions (selling straddles or strangles).

Greeks.live analysts note that this behavior, especially at key strike prices like ETH 3650P, 3400P puts, and 3800C calls, appears to be an attempt to recover previous losses and bet that downside risk is overestimated, expecting the market to remain range-bound. They are betting that by maintaining short puts and selling calls, the market will stay calm.

However, this strategy is a double-edged sword: if the market remains stable, they profit from premiums; but if prices break through key support or resistance levels, they face potentially catastrophic losses.

Macro headwinds and the final test of expiration effects

Current macroeconomic headwinds also weigh on the crypto market. Deribit notes that recent CPI data and Fed Chair Powell’s comments have dampened inflows into Bitcoin ETFs. Nonetheless, overall open interest remains high, reflecting active participation, but with heightened caution about upcoming volatility.

Since many strike prices are close to current prices, even mild movements could significantly impact settlement outcomes. The next few hours will be a stern test for traders shorting volatility and may reveal the true underlying strength or weakness of the market amid late-cycle warnings.

Conclusion

This $5.4 billion options expiration serves as a crucial test of the current crypto market’s structural stability. Traders, warning of a potential cycle end, persist in short volatility positions, reflecting a strong expectation of short-term stability. However, macroeconomic uncertainties and large open interest near key strike prices mean that any minor external shocks could be amplified, causing short-term price swings. Investors should closely monitor the defense of the $100,000 support for Bitcoin and the $3,500 support for Ethereum around settlement time to avoid being caught in a wave of liquidations driven by high leverage.