Daily Bitcoin On-Chain Snap #11

Max Pain Price increased to $48,000 for Options expiring 5 October

Max pain, or the max pain price, is the strike price with the most open options contracts (i.e. puts and calls) and it is the price at which the asset would cause financial losses for the largest number of option holders at expiration. As such, Options with a 5 October expiry suggests BTC should trade close to the max pain price of $48,000 going into 5 October. This is increasingly evident, as derivatives activity continues to drive spot activity.

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High Put/Call of 2 for 5 October expiry suggests Smart Money are increasingly hedging their portfolio in anticipation of near-term volatility

The put-call ratio is calculated by dividing the number of traded put options by the number of traded call options. The put/call ratio is used to gauge the overall mood of a market. A rising put/call ratio, or a ratio greater than .7 means that traders are buying more puts than calls. It suggests that bearish sentiment is building in the market. Investors are either speculating that the market will move lower or are hedging their portfolios in case there is a sell-off. As such, near-dated options are exhibiting much higher put/call ratios than their one-week equivalent. That is, options for 5 October expiry have a put/call of 2+, whereas options three days later on 8 October have put/call of .77. This makes sense given the parabolic move upwards from the prior week that forced traders to buy protection on the run up.

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