Ethereum Options Expiry Shows Risks Below $2,900

Ether (ETH) has been unable to sustain prices above $3,400 for the past 40 days, raising concerns among traders that bears may remain in control for longer.

Key takeaways:

• $6B in Ether options will expire on Dec. 26, with call (buy) bets outnumbering put (sell) instruments by 2.2 times.

• Bears hold the advantage unless ETH price breaks $3,100.

The $6 billion ETH options expiry on Dec. 26 could add further pressure, as bulls had anticipated year-end prices of $4,000 or higher before the 28% crash in November.

Ether’s price at 8:00 am UTC on Friday will determine whether bears retain control, despite call (buy) options outnumbering put (sell) instruments by a factor of 2.2.

Deribit accounts for 70% of total open interest, followed by the Chicago-based CME with 20%. However, most of the $4.1 billion in call (buy) options are set to expire worthless on Friday, as traders concentrated bullish bets on year-end Ether prices between $3,500 and $5,000.

Less than 15% of aggregate call options were positioned at $3,000 or lower.

Related: Trend Research quietly becomes one of Ethereum’s largest whales with 46K ETH buy

Even excluding overly optimistic calls at $5,000 and above, which likely carried limited cost to buyers, data shows that fewer than 25% of these instruments were placed below $3,200.

Traders often sell covered calls at $8,000 and $10,000 year-end strikes with no realistic expectation of reaching those levels.

While bulls were overly confident that Ether would reclaim $3,400 by year-end, bearish strategies may also have gone too far by clustering bets between $2,200 and $2,900.

If Ether trades above $2,950 on Friday, more than 60% of the $1.9 billion in aggregate put options will expire worthless. Even so, bearish positions remain better placed as long as ETH stays below $3,200.

Investors reacted to last Thursday’s reports that Intel failed in its push to manufacture advanced chips in the US as it sought to challenge global leader Taiwan Semiconductor (TSMC US).

According to Bloomberg, Nvidia (NVDA US) halted production tests that relied on Intel’s manufacturing processes.

ETH options traders see heightened risk

As traders priced in weaker prospects for the economic impact of artificial intelligence in the US, many moved to hedge their ETH positions.

Demand for bearish ETH options strategies increased, including the “bear diagonal put spread,” “bear put spread,” and “bear call spread,” particularly after multiple failed attempts to reclaim the $3,400 level over the past five weeks.

$3,100 is key for Ether bulls

Below are four probable scenarios for the year-end ETH aggregate options expiry based on current price trends:

• Between $2,700 and $2,900: The net result favors the put (sell) instruments by $580 million.

• Between $2,901 and $3,000: The net result favors the put (sell) instruments by $440 million.

• Between $3,101 and $3,200: Balanced outcome between call and put options.

• Between $3,201 and $3,300: The net result favors the call (buy) instruments by $150 million.

A Dec. 26 expiry below $2,900 could further weaken Ether investor sentiment. However, Ether bulls still have an opportunity to push prices toward $3,100 on Friday, which would help balance positioning and distance Ether’s price from the $2,775 December lows.

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