Roughly $1.45 billion worth of Bitcoin and Ethereum options are set to expire on Deribit.
Traders will be closely watching this event since it could trigger more volatility.
According to Deribit, approximately $1.23 billion in Bitcoin options and $218 million in Ethereum options will expire at 08:00 UTC on Friday.
What an options expiry means
Options are derivative contracts that make it possible for traders the right to buy or sell an asset at a predetermined price before a specified expiration date.
Traders often close, roll over, or hedge their positions when options contracts expire. Hence, this repositioning can potentially increase volatility.
Deribit noted that the event could create favorable conditions for traders using short-dated options. "This floods the market with liquidity and volatility, creating prime conditions for trading short-dated options on Deribit."
What the metrics show
Traders typically pay close attention to the put-to-call ratio, which compares bearish put options with bullish call options.
Bitcoin's ratio of 0.86 indicates there are more call options than puts outstanding. Market players remain relatively bullish on BTC heading into expiry.
Ethereum, by contrast, has a 1.54 put-to-call ratio. This shows greater demand for downside protection or bearish positioning.
For this expiry, Bitcoin's max pain level stands at $62,500 (Ethereum's is $1,750). Markets do not necessarily gravitate toward these levels, but traders often monitor them due to the fact that prices can sometimes drift toward max pain.
Short-dated options gain popularity
Deribit has also noted that there is growing activity in weekly contracts. "Big open interest is building into tomorrow's weekly expiry on Deribit."
The exchange added that short-dated options have become increasingly popular among traders employing gamma scalping. This is a strategy involving buying and selling the underlying asset to hedge options exposure and profit from sharp price movements.