- A record $1 billion worth of Bitcoin options expired last month, slashing open interest.
- Bitcoin options allow traders to hedge their risk when investing in the digital asset.
July is slated for another massive Bitcoin options market expiry following last month’s record $1 billion expiry, covered by The Crypto Associate. Data from Skew, a cryptocurrency analytics platform, shows that over 47,000 Bitcoin worth of options are due to expire on July 31.
Bitcoin options enable buyers to purchase or sell Bitcoin at a specified price on or before the option’s expiry date. If they chose not to exercise the option their downside is only the premium they paid for the option.
Option buyers can choose between calls and puts. To buy options, traders will usually pay a premium and have the choice of whether or not they want to exercise the option.
A Bitcoin call allows option buyers to purchase Bitcoin at a specific price, also known as the strike price. Therefore, traders bullish on Bitcoin will purchase a Bitcoin call option and if the price of Bitcoin rises above the strike price, the trader can exercise the option and purchase the Bitcoin at the strike price.
On the other hand, those bearish on Bitcoin and purchasing a Bitcoin put option. A put allows traders to sell Bitcoin at the strike price. Assuming Bitcoin falls below the strike price, put holders can exercise their option and sell Bitcoin above the spot price.
What The Expiry Can Mean
In addition to the steep fall in Bitcoin options open interest, the Bitcoin options trading market also saw a sharp increase in trading volume on the expiry date, June 26.
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