Bullish strategies dominate the $5 billion Ethereum options expiry, which will benefit traders if prices rise.
Neutral to bearish strategies mostly fail below $4,600, and as Ethereum rebounded in August, traders face risk exposure.
The $5 billion Ethereum (ETH) options expiry on Friday could mark a turning point for the cryptocurrency, as the ETH price has risen 22% in the past 30 days, putting bullish strategies in a more favorable position. This event could provide the momentum needed for Ethereum to break through $5,000, although investors remain focused on the anticipated Nvidia (NVDA) earnings report this Wednesday.
With a current market capitalization of $557 billion, Ethereum ranks among the top 30 tradable assets, ahead of giants like Mastercard (MA) and ExxonMobil (XOM). While there is debate over whether Ethereum should be compared to stocks, its historical correlation with the S&P 500 index suggests that traders apply similar risk assessments to both asset classes.
An 80% correlation indicates that Ethereum's price closely follows the S&P 500's movements, although this relationship briefly reversed during a two-week period in late July. Therefore, Ethereum traders have reason to pay attention to corporate earnings reports, especially those in the artificial intelligence sector, which have been a major driver of stock market indices.
Ethereum bullish (buy) options hold $2.75 billion in open contracts, 22% more than the $2.25 billion in bearish (sell) contracts, but the expiry outcome depends on the ETH price at 8 AM UTC on Friday. Deribit dominates the ETH options market with a 65% share, followed by OKX at 13% and CME at 8%, making it valuable to analyze data from leading exchanges.
When ETH rebounded earlier in August, Ethereum bears were caught off guard, as most bearish bets were placed at $4,000 or below. Despite being rejected at $4,800, traders pursuing bullish strategies are in a favorable position for the $5 billion monthly expiry.
Only 6% of ETH bearish options are set at $4,600 or higher, rendering most neutral to bearish structures effectively worthless. In contrast, 71% of bullish options are set at $4,600 or below, with significant clusters at $4,400 and $4,500. Therefore, bulls are expected to continue supporting Ethereum's price ahead of the monthly expiry.
Here are four possible scenarios based on current price trends on Deribit. These outcomes are based on the estimated theoretical profits from the imbalance of open contracts but do not include complex strategies, such as selling call options for downside price exposure.
Between $4,050 and $4,350: $820 million bullish (buy) vs. $260 million bearish (sell). Net result favors bullish instruments by $560 million.
Between $4,350 and $4,550: $1.05 billion bullish vs. $140 million bearish, favoring bullish by $915 million.
Between $4,550 and $4,850: $1.4 billion bullish vs. $45 million bearish, favoring bullish by $1.35 billion.
Between $4,850 and $5,200: $1.82 billion bullish vs. $2 million bearish, favoring bullish by $1.8 billion.
Even if ETH pulls back to $4,400, Ethereum bulls may feel very satisfied with the monthly options expiry. While it remains feasible for Ethereum to break through $5,000 in the coming weeks, this outcome may depend on trader sentiment following Nvidia's earnings report and their overall assessment of global economic growth risks.
Related: Nvidia reports second-quarter financial results with a 56% surge in revenue.
This article is for general informational purposes only and does not constitute legal or investment advice. The views, thoughts, and opinions expressed here are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Original article: “Will $5K ETH Follow Friday’s $5 Billion Ether Options Expiry?”
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