$11 Billion of Bitcoin Options Set to Expire Oct. 30, Raising Volatility Risks Ahead of US Midterms
About $11 billion worth of Bitcoin options are set to expire on Oct. 30. With hedging activity clustered around current price levels and the US midterm elections coming next month, volatility could increase.Bloomberg reported on Oct. 29 that the contracts due to expire account for about one-third of all open Bitcoin options on crypto derivatives exchange Deribit. Bitcoin fell below $80,000 earlier this week and was trading around $81,100 during Singapore hours on Oct. 29.Call options with strike prices of $90,000, $95,000 and $100,000 outnumber puts. If the current price holds, however, those calls are likely to expire worthless. Instead, the market is focused on options closer to spot and the hedging flows tied to them.About 70% of gamma in the expiring options is concentrated in the $75,000 to $82,000 range, Adam Hames, head of asset management at Tesseract Group, said. Gamma measures how much hedging needs change as the underlying asset price moves. Hames said that if dealers are short options, hedging-related selling on further price declines could deepen losses in the $75,000 to $78,000 range. Below $80,000, put options outnumber calls by more than two to one.Volatility drivers may remain even after the expiry. Caroline Mauron, co-founder of Orbit Markets, expects option sellers to slow the supply of new contracts until the outcome of the Nov. 3 midterm elections becomes clear. That could reduce the options supply that helps cushion price swings, amplifying market moves before and after the vote.The election result is also a factor that could affect momentum behind the Trump administration's crypto-friendly policy push. In a Bloomberg Markets Pulse survey, the median year-end Bitcoin forecast was $90,800 if Republicans retain both the Senate and House, $76,450 if Democrats control both chambers, and $84,100 if the two parties split control.“We expect a meaningful pickup in volatility in November, given that volatility has remained at historically low levels over the past year,” Paul Howard, senior director at Wincent, said.