Nearly $600 million worth of $20,000 bitcoin put options have emerged as the third most popular strike ahead of Deribit’s quarterly expiration, showing how traders are positioning themselves for extreme downside scenarios due to the Middle East conflict.
A put option gives the holder the right, but not the obligation, to sell bitcoin at a predetermined price. With bitcoin trading below $70,000, the $20,000 strike is considered deep out of the money, meaning it will only gain value in the event of a sharp market collapse or a 70% decline from current prices.
About $596 million in notional value, the total dollar value of underlying contracts, is concentrated around the $20,000 strike, making it one of the three most dominant positions. The others sit at $75,000 with $687 million and $125,000 with $740 million, highlighting a wide spread of expectations across both downside and upside scenarios.
Looking at it at face value, a large position in a $20,000 put option may indicate fear of a meltdown. However, the structure of the market is more nuanced.
Much of this activity is likely driven by traders selling these far out of the money to collect premiums, reflecting the low probability of bitcoin falling to $20,000 rather than an outright hedge against a crash. In other words, it is often a strategy tied to income generation or volatility positioning, rather than outright bearish conviction.
The total notional value of bitcoin options expiring on Deribit is $13.5 billion. Although the market is in extreme fear, the options market still leans slightly bullish with a put call ratio of 0.63, indicating more call options than puts, which are typically used to express bullish views. Total open interest is 195,719 BTC, with 120,236 BTC in calls and 75,482 BTC in puts.
Meanwhile, the maximum pain level, the price at which the largest number of options expire worthless, is $75,000, potentially acting as a magnet for expiration. Since options market makers often hedge around this level, the price pulls towards where the largest number of contracts expire worthless.
