Bitcoin has risen above $110,000, led by renewed optimism about US-China trade relations. The rejection means BTC is now trading at levels where market makers could add to the price turbulence ahead of Friday’s expiration of multi-billion dollar options.
Data from the Deribit-listed options market, tracked by Amberdata and Deribit Metrics, shows that $13 billion in bitcoin options – calls and puts – are set to expire on Friday. Notably, traders and market makers have negative gamma exposure at $100,000 and $111,000, meaning they have sold (written) more options than they have bought at these levels.
In such scenarios, market makers hedge their positions by trading with the market – buying when prices rise and selling when prices fall – to maintain net delta (market) neutral exposure.
Their hedging activity typically intensifies as expiration approaches. That’s because gamma sensitivity increases as time to expiration approaches, especially for at-the-money (ATM) or near-the-money options, such as those at the $110K and $111K strikes.
The chart shows that the trader’s gamma is largely negative between $105,000 and $111,000, indicating an opportunity for increased trading activity around these levels.
Beyond this range, the gamma exposure becomes net positive at $114,000.
All in all, bitcoin’s next big move may come less from fundamentals than from the mechanical hedging flows of options traders.
