The hidden force behind Bitcoin and Ether price swings: Options expiry

Options expiry significantly influences the volatility of Bitcoin and Ether prices as traders adjust their positions leading up to expiry dates. Options are contracts that allow the holder to buy or sell BTC or ETH at a predetermined price before expiration. As expiry approaches, these contracts can affect market prices and trigger high trading volumes. The balance between call and put options serves as a sentiment indicator, and higher put-call ratios often indicate bearish sentiment. The Max Pain theory suggests prices may gravitate towards levels where the most options expire worthless, potentially leading to price manipulation. Historical data shows that events like large expiries result in notable price fluctuations; for example, an event in June 2021 saw significant volatility due to a large amount of options set to expire. To navigate these events, traders should monitor key metrics like open interest and put-call ratios, hedge positions, diversify assets, and use advanced analysis tools to capitalize on opportunities during expiry periods.

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