Bitcoin options worth $2.7 billion expire before US jobs report

$2.7 billion in Bitcoin options expire Friday

Bitcoin options worth about $2.7 billion expire on Friday, Nov. 6. The expiry takes place about 5.5 hours before the US jobs report.

Options are contracts that give a trader the right to buy or sell an asset at a set price. Deribit, a crypto exchange for futures and options, reported the size of the expiring contracts.

Expiry in numbers

• 33,441 BTC in options expire at 08:00 UTC on Nov. 6.
• The $2.7 billion figure is the notional value of the contracts. It is not money expected to enter or leave the market.
• The calculated max pain price is $79,000. This was about 1.6% below Bitcoin's $80,280 price reported in the article.
• Call options account for about 25,012 BTC in open interest. Puts account for about 8,429 BTC.
• The put-to-call ratio is 0.34. This means there are nearly three calls for every put.
• The largest call positions are at $82,000 and $85,000. Large put positions sit between $72,000 and $75,000.

What max pain does and does not mean

Max pain is the settlement price where outstanding options would produce the lowest total payout. Traders watch the level before expiry.

It does not guarantee that Bitcoin will move to $79,000. Actual settlement depends on Bitcoin's price at expiry and on how traders manage their positions.

Friday expiry ends before the jobs report

The US Bureau of Labor Statistics will release October's employment report at 08:30 Eastern, or 13:30 UTC, on Nov. 6. This is 5.5 hours after the Deribit options expire.

Deribit settles these contracts using Bitcoin's average index price between 07:30 and 08:00 UTC. Any price reaction to the jobs report falls outside the protection of the expiring puts.

Traders who want cover through the report would need longer-dated contracts or other hedges. A hedge is a position used to reduce risk from a price move.

Hedging through payrolls costs more

On Nov. 5, Deribit's order book showed an $80,000 Bitcoin put expiring Nov. 6 at an asking premium of about $393 per BTC. The same strike expiring Nov. 7 was about $682.

The Nov. 7 contract was roughly 74% more expensive. The difference also reflects its longer trading time and other market pricing factors.

An $80,000 put expiring Nov. 13 was quoted at about $1,445. That contract would remain open through payrolls and the Nov. 10 inflation report, also called CPI.

These prices are a snapshot of the cost of buying new protection. The cost of rolling an existing position can differ.

What analysts expect from the jobs report

Analysts at Bitunix said markets expect the US economy to have added 65,000 jobs in October. They said the unemployment rate is expected to stay at 4.2%.

These are analyst expectations, not confirmed results. The analysts said stable employment would give the Federal Reserve more flexibility to assess inflation before changing interest rates.

They also said a sharp weakening could raise expectations of a more accommodative policy stance. A stronger-than-expected report could reinforce concerns about persistent inflation and restrictive policy, according to the analysts.

What is confirmed and what is still uncertain

Confirmed from the sources are the expiry time, the amount of open interest, the max pain calculation, the jobs report time, and the Nov. 5 put prices.

Still uncertain are the jobs report results, Bitcoin's settlement price, and any price reaction after the report. The article also notes that a live European put does not guarantee a payout from a temporary drop, because settlement depends on the delivery price.

Sources

• CryptoSlate