Ethereum options data suggests the battle for $4K ETH is at least a week away

For the past 40 days, Ether (ETH) has seen a modest upward trend, respecting a narrow channel for most of the time. It saw a brief rally towards $ 4,000 in the first week of September, but a subsequent crash put the price in the ascending channel.

Ether price at Bitstamp in USD. Source: TradingView

In August, non-fungible tokens saw record-breaking transactions that clogged the Ethereum network and caused average transaction fees to exceed $ 40 in early September. Although NFT trading volume has continued to decline, new items continue to be minted every minute whether or not they are traded.

On September 13, Cathie Wood – CEO of Ark Invest, a $ 58 billion US-based asset manager – commented that Ark is aiming for a 60% Bitcoin (BTC) and 40% Ether allotment. Ark Invest holds relevant positions in shares of Coinbase (COIN) and Grayscale Bitcoin Trust (GBTC). Additionally, Wood has been a long-time Bitcoin proponent.

Ether investors may have been lucky as one of the coin’s biggest rivals, Solana (SOL), faced a seven-hour blackout on September 14. A sudden surge in transaction volume flooded the transaction processing queue, bringing the network to a standstill.

Another incident occurred the same day after the Ethereum Layer 2 roll-up network Arbitrum One went offline for 45 minutes. The team attributed the downtime to a huge amount of transactions being submitted to the arbitrum sequencer over a short period of time.

Bitcoin options aggregate open interest for September 3rd. Source: Bybt.com

These events indicate the importance of the ETH 2.0 upgrade, which brings parallel processing and will drastically reduce transaction fees. Strangely enough, Ethereum was also faced with a large invalid block sequence from a malicious company. However, the vast majority of network clients rejected the attack, making it unsuccessful.

As shown above, bears were caught by surprise and 95% of put (sell) instruments were placed at $ 3,500 or below. Therefore, if ETH stays above this price on September 17th, only neutral to bearish put options worth $ 8 million will be activated upon expiration.

A put option is the right to sell Bitcoin on the set expiration date at a predetermined price. Thus, a put option of $ 3,000 will be worthless if ETH stays above that price at 8:00 a.m. UTC on September 17th.

The call-to-put ratio reflects a balanced situation

The call-to-put ratio of 0.95 represents the small difference between the call options (buy) valued at $ 173 million and the put options (put options) valued at $ 181 million. This bird’s eye view requires more detailed analysis considering that some of the bets are far fetched given the current $ 3,500 level.

For example, if the expiry price of Ether is $ 3,300 on September 17th, any call option above that price will be worthless. In this case, a right to acquire ETH for $ 3,700 will have no value.

Below are the four most likely scenarios taking into account the current Ether price. The imbalance, which benefits both sides, represents the theoretical profit from the expiry. The following data shows how many contracts are activated on Friday, depending on the expiry price:

• Between $ 3,100 and $ 3,300: 2,100 calls vs. 20,300 puts. The net result is $ 58 million favoring the protective put instruments (bears).
• Between $ 3,300 and $ 3,500: The net result is balanced between bears and bulls.
• Between $ 3,500 and $ 3,700: 17,600 calls vs. 2,300 puts. The net result is $ 55 million, favoring the call options (bull).
• Over $ 3,700: 17,600 calls vs. 2,300 puts. The net result favors the call options by $ 85 million.

This raw estimate takes into account that call options are only used in bullish strategies and put options in neutral to bearish trades. However, investors may have used more complex strategies that usually involve different expiration dates.

Minimal volatility is expected this week

Buyers and sellers are faced with small profits from a moving ether price in order to increase their returns as the options expire weekly. Whether or not it hits $ 3,500 is going to be interesting – things could go either way.

To put things in perspective, ETH’s monthly option expiration on September 24 currently holds an open interest of $ 1.6 billion. Therefore, both sides will likely focus for the next week.

The views and opinions expressed are those of the author only and do not necessarily reflect the views of Cointelegraph. Every investment and trading movement involves risks. You should do your own research when making a decision.

source https://www.bisayanews.com/2021/09/17/ethereum-options-data-suggests-the-battle-for-4k-eth-is-at-least-a-week-away/