Tech
350,000 Ethereum (ETH) Options with High Pain Point of $3,200 Expiring Today
Given Ethereum’s price trajectory, the approval of Ethereum spot ETFs in the US yesterday, May 23, seems like a buy the rumor and sell the news scenario. With Ethereum down more than 4%, approximately 350,000 ETH options will expire today, Friday, May 24.
These short-dated ETH options have a Max Pain price of $3,200 and a Put Call Ratio of 0.58, and have a staggering notional value of $1.3 billion.
Effects of ETFs on Ethereum
The Max Point indicates the price level at which options holders would suffer the maximum financial loss. Meanwhile, Ethereum has witnessed considerable volatility leading up to today’s expiration.
Ethereum has recently seen significant rallies due to speculation about its potential spot ETF ETH approval. Ether rose above $3,000, surpassing the $3,900 mark and approaching $4,000, as traders piled coins in anticipation of a bolder rally.
However, right after the Ethereum ETF commercial launch, ETH’s rally stopped, replaced by a 4% decline. Ethereum is now trading around the $3,700 mark. Despite this decline, Ethereum has shown strong performance in recent weeks, often outpacing Bitcoin’s rally.
This bullish sentiment was primarily driven by advances in ETF developments, culminating in a dramatic 20% increase in the price of Ethereum in a single day.
During this period, Ethereum (IV) short-term option implied volatility reached 150%. This value was significantly higher than Bitcoin’s IV for the same period, raising traders’ expectations regarding price movement.
Meanwhile, analysis of block trading and market structures reveals sustained bullish sentiment for Ethereum despite the recent decline.
However, maintaining elevated IV levels consistently for each primary trimester has proven challenging. This scenario suggests that although the market is optimistic, it is also volatile and unpredictable.
In this context, traders may consider calendar spreads a more favorable strategy. These spreads can help manage risk and take advantage of volatility without relying solely on high and sustained IV levels. They typically involve buying and selling options with different expiration dates.
In particular, the approval and launch of the Ethereum ETF had a significant impact on the market, leading to increased volatility. Shortly before the ETF approval, the price of Ethereum fluctuated significantly, resulting in long liquidations of over $132 million.
This liquidation event highlights the risks and rapid changes in market sentiment that can occur during such high-profile developments.
Potential for sales or profit-taking activity
With options expiring on 350,000 Ethereum today, market participants will be closely watching the price action around the $3,200 Max Pain point.
Meanwhile, crypto analyst Ali Martinez did observed increase Ethereum deposits in digital asset exchange wallets. This trend suggests that Ethereum holders may be preparing for a significant sell-off or increased profit-taking activity.
Additionally, the Tom DeMark (TD) sequential indicator is flashing a sell signal on the daily chart of Ethereum. A green nine candle has appeared on the daily chart, suggesting increased selling pressure. This could lead to a price retracement between one and four daily candles. It may also trigger a new downtrend before the uptrend can resume.
Despite these bearish signals, Ethereum’s recent price correction could represent a bearish opportunity for long-term investors. Historically, such corrections have been viewed as entry points by those with a long-term perspective on Ethereum’s potential.
Although the US SEC has approved the 19b-4 filing for an Ethereum ETF, the S1 registration is still pending. The registration process is expected to take a few more weeks. The funds are waiting for the official price before there is a significant inflow, which could trigger a rally.
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