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Ethereum Options Max Pain Price Is Now at $2,800 After 16% Retrace

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Wed, 09/22/2021 - 12:00
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Arman Shirinyan
Ethereum is getting closer to the max pain price for options holders
Ethereum Options Max Pain Price Is Now at $2,800 After 16% Retrace
Cover image via stock.adobe.com

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After the recent cryptocurrency market sell-off, Ethereum got extremely close to the max pain price. In addition to that, altcoins like Ethereum or Cardano faced up to 20% retraces, which then ended up in a rapid bounceback above key values like $3,000 on Ethereum and $2 on Cardano.

Options are another way of interpreting current market conditions. They provide data about the possible support and resistance zones that appear on spot trading pairs. Ethereum's max pain price at press time is staying at $2,880, which is currently a magnet for buy orders according to order books on various exchanges.

What is the max pain price?

The max pain price is the strike price with the most concentration of open options contracts, including puts and calls. The main point of the max pain price is that holders will face major financial losses if the stock's price reaches it. The term itself is based on the max pain theory, which does not recommend holding options contracts until expiration.

Ethereum Options
Source: Deribit

According to the theory, the price of the underlying asset tends to move toward that max pain price.

What might happen if the max pain price hit?

First and foremost, the majority of options holders will face major losses if Ethereum hits the strike price of $2,880. Major losses for options holders will not reflect on spot trading pairs since those are two different markets. Negative price movement on the ETH pair will be a part of the current trend.

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Usually, traders use options to hedge their positions on the spot or derivatives markets (futures). Trading with options themselves is extremely risky due to the high volatility of the contract's price.

At press time, Ethereum is trading at $2,905 with a put/call ratio of 0.69, which means that there are still more call (buy) options open than put (sell).

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About the author

Arman Shirinyan is a trader, crypto enthusiast and SMM expert with more than four years of experience.

Arman strongly believes that cryptocurrencies and the blockchain will be of constant use in the future. Currently, he focuses on news, articles with deep analysis of crypto projects and technical analysis of cryptocurrency trading pairs.