Ethereum options data suggests battle for $ 4,000 ETH is at least a week away


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During the last 40 days, Ether (ETH) trended slightly upward, mostly respecting a narrow channel. It experienced a brief rally to $ 4,000 during the first week of September, but a subsequent crash brought the price into the ascending channel.

Ether price at Bitstamp in USD. Source: TradingView

In August, non-fungible tokens posted record transactions, clogging the Ethereum network and pushing the average transaction fee above $ 40 in early September. Although the volume of NFT transactions has continued to sag, new items continue to be created every minute, whether or not they are traded.

On September 13, Cathie Wood – CEO of Ark Invest, a US-based $ 58 billion asset manager – commented that Ark is aiming for 60% Bitcoin (BTC) and 40% Ether Allowance. Ark Invest holds relevant positions in Coinbase (COIN) and Grayscale Bitcoin Trust (GBTC) stocks. Additionally, Wood is a longtime Bitcoin advocate.

Ether investors may have been lucky as one of the coin’s biggest rivals, Solana (SOL), faced a seven hour blackout September 14. A sudden increase in transaction volume flooded the transaction processing queue, causing the network to go down.

Another incident happened the same day after the Ethereum Layer Two stacking network Referee one disconnected for 45 minutes. The team attributed the downtime to a massive batch of transactions submitted to the Arbitrum sequencer over a short period of time.

Bitcoin options accumulate open interest for September 3. Source: Bybt.com

These events highlight the importance of upgrading to ETH 2.0, which will bring parallel processing and significantly reduce transaction costs. Oddly enough, Ethereum also faced a large sequence of invalid blocks from a malicious entity. However, the vast majority of network customers rejected the attack, making it unsuccessful.

As noted above, the bears were taken by surprise and 95% of the sell (sell) instruments were placed at $ 3,500 or less. Therefore, if ETH stays above this price on September 17, only $ 8 million neutral to bearish put options will be activated upon expiration.

A put option is a right to sell Bitcoin at a predetermined price on the set expiration date. So a put option of $ 3,000 becomes worthless if ETH stays above that price at 8:00 UTC on September 17th.

The call-to-put ratio reflects a balanced situation

The call-to-put ratio of 0.95 represents the small difference between call (call) options worth $ 173 million and put (put) options of $ 181 million. This bird’s eye view requires more detailed analysis which considers some of the bets to be overblown considering the current level of $ 3,500.

For example, if Ether’s expiration price on September 17 is $ 3,300, each call option above that price becomes worthless. There will be no value for a right to acquire ETH at $ 3,700 in this case.

Below are the four most likely scenarios given the current price of ether. The imbalance in favor of each side represents the theoretical profit of the expiration. The data below shows how many contracts will be activated on Friday, based on the expiration price:

  • Between $ 3,100 and $ 3,300: 2,100 calls against 20,300 put options. The net result is $ 58 million in favor of the protective sell instruments (bear).
  • Between $ 3,300 and $ 3,500: The net result is balanced between bears and bulls.
  • Between $ 3,500 and $ 3,700: 17,600 calls against 2,300 put options. The net result is $ 55 million in favor of call options (bull).
  • Above $ 3,700: 17,600 calls against 2,300 put options. The net result favors call options of $ 85 million.

This raw estimate considers call options used exclusively in bullish strategies and puts in neutral to bearish trades. However, investors may have used more complex strategies which usually involve different expiration dates.

Minimum volatility is expected for this week

Both buyers and sellers will face small gains from a moving ether price to increase their returns as the weekly options expire. Whether or not it hits $ 3,500 will be interesting – things could go both ways.

To put it in perspective, the ETH options’ monthly expiration of September 24 currently holds an open interest of $ 1.6 billion. So the two sides are probably concentrating their efforts for the next week.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trade move involves risk. You should do your own research before making a decision.


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About Darnell Yu

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