Bitcoin options expiry, explained: What it means for traders
2024-12-17
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 What is Bitcoin options expiry? 
Bitcoin options expiry is the date when Bitcoin options contracts end, allowing investors to buy or sell Bitcoin at a set price before the expiration.
Let’s understand the Bitcoin BTCUSD options expiry concept with a simplified example:
Suppose you’re eyeing a sports car priced at $50,000. The dealer offers you an option: Pay a small fee today, say $1,000, to lock in the right to buy the car at $50,000 anytime in the next 30 days instead of paying the full amount now. This $1,000 is the premium you pay for the option to buy the car later at today’s price, regardless of whether the price increases or decreases during that time.
If the car’s price increases to $55,000 during those 30 days, you can exercise your option and buy the car for $50,000, saving $5,000 (minus the $1,000 premium). However, if the car’s price stays at $50,000 or falls below it, you might decide not to buy, and your option expires. In this case, you lose only the $1,000 premium, and you’re not required to buy the car.
In simple terms, Bitcoin options expiry is the date when an options contract — the right to buy or sell Bitcoin at a set price (the “strike price”) — reaches its deadline. After this date, the option is either exercised if it is profitable or expires worthless. This process may not always be automatic; some platforms handle it automatically, while others might require you to manually exercise it.
Therefore, the holder may decide to exercise the option and lock in the profit. For example, with a call option (giving the right to buy), if Bitcoin’s price goes above the strike price, the holder profits; with a put option (giving the right to sell), profit comes if BTC’s price falls below the strike price.
If the option is not profitable — i.e., the market price is worse than the strike price — the option expires worthless. This means the holder loses the premium paid for the option, and the option has no value.
So, who determines premiums and prices?
Behind the scenes, strike prices and premiums are determined by supply and demand among traders and algorithms used by platforms to account for market factors such as volatility and time decay (how the option’s value decreases as the expiry date approaches).
 How Bitcoin options expiry works 
An options contract allows buying or selling Bitcoin at a set price (the “strike price”) before a specific date, with key conditions such as strike price, expiry date and premium defining its structure.
The key components of an options contract are:
For example, suppose you buy a call option with a strike price of $90,000 for Bitcoin and pay a premium of $2,000 for this contract. Two scenarios may happen in this case:
If the price rises to $105,000:
If the Bitcoin’s price stays below $90,000 (say $87,000):

On the other hand, let’s look at an example of a put option for Bitcoin with a strike price of $90,000 and a $2,000 premium. If Bitcoin’s price drops to $75,000, you can sell at $90,000, earning a profit of $15,000. After subtracting the $2,000 premium, your net profit is $13,000. However, if Bitcoin’s price rises above $90,000 — e.g., $93,000 — the option expires worthless, and you lose the $2,000 premium. The benefit of a put option is having the right to sell at the strike price without the obligation to do so.

In addition, there are two styles:
But when do Bitcoin options contracts expire? Depending on the contract, Bitcoin options may have different expiration dates, although they usually expire on the final Friday of each month.
Are Bitcoin options cash settled?
Yes, Bitcoin options listed on Cboe are cash-settled at expiration, avoiding the need to physically deliver Bitcoin or Bitcoin exchange-traded funds (ETFs). The new Cboe Bitcoin US ETF Index options, launched on Dec. 2, 2024, are also settled in cash. 
These options indirectly expose the price of spot Bitcoin via the Cboe Bitcoin US ETF Index, which tracks Bitcoin ETFs listed in the US. This feature simplifies trading by eliminating the complexities of sending and receiving Bitcoin for this process.
 Impact of Bitcoin options expiry on Bitcoin price 
Bitcoin options expiry can lead to increased volatility as traders adjust positions and unwind bets, and the price may gravitate toward specific strike prices due to high open interest and the pinning effect.
The market is impacted by Bitcoin options expiration in many ways:
 Will Bitcoin’s stability hold amid December’s major options expiry? 
A major options expiry on Dec. 27, with reduced open interest, could cause volatility and shift market sentiment.
Although the price of Bitcoin surpassed $100,000 on Dec. 5, the market is showing signs of slowing down. Because so many traders have placed bets on rising prices, the market is becoming “overheated.” Market makers use options trading strategies to help stabilize Bitcoin around $100,000. 
However, a major options expiry on Dec. 27 could remove this support, potentially leading to significant price fluctuations.

Notably, Bitcoin’s recent rally above $80,000 has significantly reduced open interest for December’s options expiry from $11.8 billion to just $96 million. Only put options with a strike price of $85,000 or lower will be active if Bitcoin remains above $88,000 on Dec. 27.
Thus, the expiration of Bitcoin options affects the entire cryptocurrency market, not just individual traders. In addition, this event can potentially influence market sentiment. For instance, traders may be feeling optimistic about Bitcoin’s future if there is a high concentration of call options, which are bets on price gains. Conversely, a greater number of put options could indicate a pessimistic view.
 Risk management strategies for Bitcoin options trading 
As options expiration approaches, traders can control risk through speculation, hedging, income generation and advanced strategies.
Now let’s understand how traders can control risk as options expiration approaches:
 Bitcoin trading tips ahead of options expiry 
As options expiration approaches, traders should track expiry dates, monitor open interest for potential price direction, observe time decay, and prepare for volatility.
Let’s understand these tips in a bit more detail:
By staying informed and preparing for the event, traders can maximize their opportunities and manage their risks effectively.
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