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On the financial landscape of Ethereum (ETH), the 27th of October is set to be a date of particular significance. This is not owing to any scheduled technological updates or platform announcements but due to a considerable event in the derivatives market.
Specifically, there are 100,000 ETH call options set to expire at the $1,700 strike price. Even more notably, a cumulative total of over 400,000 call options sit at this very level, with the overall value of options expiring on this day reaching an impressive $1.3 billion. For context, this volume is atypically large, warranting a closer examination.
Options, by their nature, provide holders the right (without the obligation) to buy or sell an underlying asset at a predetermined price within a specified time frame. The expiration of options, especially in large volumes, has the potential to inject significant volatility into the asset's price. This is due to the potential hedging activities or the closing out of positions by institutional and individual traders.
Yuri MolchanThe mechanics of how options expiration can impact price are intricate. When nearing expiry, if the Ethereum price hovers near the strike price of a significant volume of options, there can be considerable buying or selling pressure. This is because contract holders will either look to close their positions or allow them to expire worthlessly, depending on market conditions and individual strategies.
An examination of Ethereum's daily chart in the lead up to this date suggests an optimistic price trajectory. The price movement has been predominantly upward, breaking past several resistance points. The moving averages indicate a bullish trend, with the shorter-term average crossing above the longer term, typically seen as a positive sign. However, with the looming expiration date, the potential for heightened volatility is undeniable.
Alex Dovbnya
Dan Burgin
U.Today Editorial Team
Vladislav Sopov