Nearly $600 million worth of $20,000 bitcoin puts became the third most popular strike ahead of Deribit’s quarterly expiration, showing how traders are positioning themselves for extreme downside scenarios due to conflict in the Middle East.
A put option gives its holder the right, but not the obligation, to sell bitcoin at a predetermined price. With bitcoin trading below $70,000, the $20,000 strike price is considered very out-of-the-money, meaning it would only gain value in the event of a sharp market crash or decline of 70% from current prices.
About $596 million in notional value, or the total dollar value of the underlying contracts, is concentrated at the $20,000 strike price, making it one of the three most dominant positions. The others are at $75,000, with $687 million, and $125,000, with $740 million, highlighting a wide range of expectations in both bearish and bullish scenarios.
At first glance, heavy positioning on a $20,000 put option might suggest collapse fears. However, the market structure is more nuanced.
Much of this activity is likely driven by traders selling these very out-of-the-money puts to collect premiums, reflecting the low likelihood of Bitcoin falling to $20,000 rather than a direct hedge against a crash. In other words, it is often a strategy related to income generation or volatility positioning, rather than pure bearish conviction.
The total notional value of expiring Bitcoin options on Deribit is $13.5 billion. Even though the market is extremely fearful, the options market remains slightly bullish, with a put call ratio of 0.63, indicating more call options than puts, typically used to express bullish views. Total open interest stands at 195,719 BTC, with 120,236 BTC in calls and 75,482 BTC in puts.
Meanwhile, the maximum pain level, the price at which the most options expire worthless, is $75,000, which could potentially act as a magnet until expiration. Because options market makers often hedge around this level, prices are pulled toward where the greatest number of contracts expire worthless.
