What is the impact of the expiration of BTC options? Analysis of the impact of BTC options expiration

Detailed explanation of the impact of BTC options expiration date and open contract processing

Hedging traders often use Bitcoin (BTC) options to predict price trends or take advantage of market volatility without having to buy and sell BTC directly. BTC options give investors the right to buy and sell BTC at a pre-order price (exercise price) on or before a specific date (expiration date). On the expiration date, the options are executed at the pre-determined price, and the spot of Bitcoin is settled immediately at the agreed market price. So, what impact will the expiration of BTC options have?

The impact of BTC options expiration on the market:

The expiration of BTC options usually triggers short-term market volatility, and the specific impact depends on the size of open positions, position direction and trading strategy. The main impacts include:

1. Volatility increases sharply: Before expiration, traders adjust positions to hedge or release hedge, resulting in a surge in trading volume in spot and futures markets, thereby amplifying market volatility, especially when open positions are huge. As the expiration date approaches, prices may fluctuate violently (Gamma squeeze).

2. Price pressure effect: Option position distribution will form price resistance or support on the expiration date. The price point with the largest number of open options (most favorable to the seller) may become the market focus, and the price may tend toward this, as the seller will try to direct the price to that point.

3. Spot and futures market linkage: When expiration occurs, options traders may need to hedge in the spot or futures market to affect prices. A large number of call options exercise may push up spot prices, while a large number of put options exercise may put pressure on spot prices.

4. Market Confidence and Expectations: Price trend after expiration will affect the short-term confidence of market participants. A strong rise may strengthen bullish sentiment, while a sharp decline may hit market confidence.

5. Changes in liquidity: After expiration, some funds may be withdrawn, and some funds may open new contracts. Short-term liquidity changes will affect price fluctuations.

6. Market Structure Adjustment: Institutional and individual investors will adjust their strategies based on their performance after maturity, and the market may form new support and resistance levels.

The consequences of open positions when expiration of BTC options:

The open position of BTC options when expiration means that the contract is open, and it will face automatic exercise or return to zero in value. The specific consequences depend on the option type (boost or bearish), the relationship between the exercise price and the maturity market price, and the contract delivery method (physical delivery or cash settlement).

Real value options (the exercise price is lower than the market price, bullish; or higher than the market price, bearish), if the funds are sufficient, the exercise will usually be automatically performed. If the expiration option (the exercise price is higher than the market price, it is bullish; or lower than the market price, it is bearish) expires, it will be of no value and will automatically expire.

In some cases, open options may be converted into spot positions according to exchange regulations. Investors are advised to actively manage option positions before the maturity date to avoid insufficient funds or unnecessary losses, and to be familiar with the exchange's settlement rules.

Summary:

The expiration of BTC options usually leads to short-term market volatility, especially when open positions are large. The market may fluctuate around the biggest pain point, and the linkage between spot and futures markets may intensify the volatility. Investors should pay close attention to the distribution of open contracts, market sentiment and trading volume changes, manage risks well, and avoid excessive leverage operations.

The above is the detailed content of What is the impact of the expiration of BTC options? Analysis of the impact of BTC options expiration. For more information, please follow other related articles on the PHP Chinese website!