“Change is the only constant” – Heraclitus

Next Friday, March 28th, we will see one of the largest options expirations in history, $11.635 Billion notional. At present, 90% of calls are out of the money and about 10% in the money. On the put side, 68% are out of the money. As these positions expire, we will see large repositioning for the next monthly and quarterly expiries, with high volumes accumulated in the June 27th expiration date.

This repositioning will give useful insight into what the market and institutions foresee for the months ahead.

Items to watch:

1. Calls to Puts

Bitcoin call open interest typically exceeds puts. However, the ratio of calls to puts gives a good sense of the level of optimism looking ahead. In Q1, calls represented ~69% of options flow. It will be interesting to see if this ratio moves in favor of more or less calls in Q2. More calls would signal a market that expects a Q2 recovery as tariff tensions fade and hopes for rate cuts and QE grow. Conversely, more puts could signal more protection in fear of more turmoil, inflation fears, and liquidity returning too slowly.

2. Total volume

The size of derivatives positions placed into Q2 Expiries will also signal general growth in digital assets. Are more participants getting involved or is interest waning? The expectations of a growing market would be increased volumes and decreasing implied volatility. This has generally been the trend for BTC historically, but not a linear one. Future volumes peaked in late Dec 24 with daily volume as high as $1.7B on Deribit. Though they have declined, they still show an elevated trend upwards on Deribit. Unlike options though, futures markets are well diversified across several exchanges so these changes may just show increasing market share being attained by Deribit (with rumors of a Coinbase acquisition on the horizon)

3. Institutional Growth

The % of Deribit Options trades being done as block trades serves as a useful proxy for institutional participation. Block trades are, by definition, larger trades, that are largely being done by institutional participants. Changes to this ratio over time can show trends in who is involved in the markets at any time. Likely, for a rally to occur, more retail participants are needed to be placing trades at market, rather than block trades than tend to not move price in the short term. At present, about 47% of contracts are being traded as block trades. I’ll be watching for a higher concentration of regular trades as a sign of a growing rally.

Though markets remain uncertain as the world awaits the next Trump tweet, market signals are showing a relatively robust BTC market with sustained volumes in derivatives. As we transition into Q2, this time of change will give us additional insight into where we think we’re heading next.

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