You'll sometimes hearing about Bitcoin's "option or future expiry dates," like those on March 26th. If there are a lot of options expiring on the same day, it may mean that there would be a lot of volatility on that day. So, the key question is: why and how do you predict the probable price direction on the expiration date & take advantage of this volatility?
To begin with, there is uncertainty around these expiration dates because market participants are attempting to adjust their positions for physical delivery of the underlying asset. As the option price approaches these crucial moments, some market makers may need to change their hedge positions in the spot market. Hence, what you have here is a situation in which option expiry events are having a direct impact on the underlying spot markets. When there's a large number of outstanding options, the impact on the spot market is likely to be much greater. To be exact, over $6.4 Billion option contracts expired on March 26th.
BTC market swings like this typically occur three days before the expiration dates, which occur roughly every three months. Historical data has shown that, that the price of Bitcoin has rallied following a pullback in price, prior to options expiring date. Options Participants who have the opportunity to close out of their position can do so in one of two ways, either close out of their position or roll forward into new options on the expiry date.
Is there, however, a way to predict which way BTC price will move on the next expiration dates? Well, there's no hard and fast rule, but you can get a general idea by digging deeper into the order books of options that are going to expire, like you would in the depth analysis of your spot market, or else to have a general idea of the put(similar to sell)/calls(similar to buy) options envelope. Each put and call option comes with a striking price (the price of BTC which is believed will close when the options expire). The goal is to find out how much theoretical buying or selling pressure will be induced as a result of the expiration of these calls or puts in the options market. Having a rough idea of what price distributions are in the future, can help you adjust your expectations. Crypto derivatives data aggregator Skew or Glassnode can help with this task.
