Bitcoin exceeded $110,000, driven by renewed optimism about trade relations between the United States and China. This rebound means BTC is now trading at levels where market makers could add to the price turmoil ahead of multibillion-dollar options expiring on Friday.
Data from the options market listed on Deribit, tracked by Amberdata and Deribit Metrics, shows that $13 billion worth of Bitcoin options – calls and puts – are set to expire on Friday. Notably, traders and market makers hold negative gamma exposure at the $100,000 and $111,000 strike prices, meaning they have sold (written) more options than they have purchased at these levels.
In such scenarios, market makers hedge their positions by trading with the market – buying when prices rise and selling when prices fall – in order to maintain net exposure to delta (market) neutral.
Their hedging activity typically intensifies as expiration approaches. This is because gamma sensitivity increases as the expiration time approaches, especially for at-the-money (ATM) or near-the-money options, such as those with strike prices of $110,000 and $111,000.
The chart shows that broker gamma is largely negative between $105,000 and $111,000, indicating the possibility of increased trading activity around these levels.
Beyond this range, gamma exposure becomes net positive at $114,000.
All things considered, Bitcoin’s next big move could come less from fundamentals and more from the mechanical hedging flows of options brokers.
