London is in the air and Ethereum bulls control the expiration of $357 million in ETH options on Friday

The price of Ether (ETH) rose 50% in the wake of the hard fork London as many investors hope the update will address the bottleneck of the network’s high transaction fees and turn altcoin into a deflationary asset.

Pantera Capital CEO Dan Morehead predicted that the newly deployed update would likely cause Ether to ‘surpass’ Bitcoin, becoming the sovereign asset of the cryptocurrency market. This, however, is a controversial topic.

To understand the impact of recent price movement, traders should look at the weekly expiration of ETH options. Deribit’s derivatives currently hold 86% of the market in this segment and the total amount of outstanding contracts maturing on August 6th is currently at $357 million.

Outstanding ETH option contracts expiring on August 6th. Source: Bybt

Neutral or bull call options protect buyers from an eventual rise in the asset’s price, and put option holders are protected from negative price movements. By measuring the risk exposure of each option based on prices, traders can better understand how bulls and bears are positioned.

Options data show bears were caught by surprise

The initial scenario shows a reasonably balanced situation because the options bid-ask ratio is at 1.15, which indicates a slight advantage, of 15%, for neutral or bullish calls. This indicator reflects the 70,956 call options that equal $191 million in open contracts, against 61,632 put options that reflect $166 million in open interest.

As the chart indicates, bears did not expect Ether to hit $2,700. This can be seen because there are no put options (pink area) above the target price.

If Ether remains above this level until the close on August 6th, all 61,653 of these contracts will be void. This is very unusual and reflects how unexpected the strong upward price movement was.

Bulls’ advantage depends largely on Ether at $2,600

While all put options will be void above $2,700, part of the neutral or bull call options were placed between $2,800 and $3,000. This means that even if Ether keeps the $2,700, 39% of the sales contracts open, for a total of $191 million, are worthless.

At $2,700, neutral or optimistic call options have a $116 million lead. However, if Ether trades below $2,600 at the Aug. 6 expiration, that number will drop to $75 million.

In any case, the weekly options largely favor the bulls and may increase your reserves for additional bets in the coming expirations of the month of August. Bears should retreat to lick their wounds and wait for a local rally before trying new put option trades.

The views and opinions expressed here are solely from the author and do not necessarily reflect Cointelegraph’s views. Every investment and trading movement involves risk. You must conduct your own research when making a decision.


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