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

The trend of Ether (ETH), which has been modestly rising, has been observed for the past 40 days. However, it is still a narrow channel. The price surged to $4,000 during the first week of September but then crashed into an ascending channel.

Bitstamp price in USD for Ether Source: TradingView

Nonfungible tokens made record-breaking transactions in August. This clogged the Ethereum network, and caused average transaction fees to exceed $40 by September. NFT trading volume has declined, but new items are still being minted every second, regardless of whether or not they’re being traded.

Cathie Wood, Ark Invest’s CEO, commented on Sept. 13 that Ark aims to allocate 60% Bitcoin (BTC), and 40% Ether. Ark Invest has relevant positions in Coinbase and Grayscale Bitcoin Trust shares (GBTC). Wood is a long-standing Bitcoin advocate.

Investors in Ether might have been lucky, as Solana (SOL), one of the largest competitors to the coin, experienced a seven-hour blackout Sept. 14. The network was impacted by a sudden spike in transaction volume, which caused the network to crash.

The Ethereum layer-two rollup system Arbitrum One was also offline for 45 minutes that day. Another incident occurred the same day. The team blamed the short downtime on a large batch of transactions that were submitted to Arbitrum sequencer in a very short time.

Open interest in bitcoin options for September. Source:

These events highlight the importance of the ETH2.0 upgrade. This will allow parallel processing and dramatically reduce transaction fees. Curiously, Ethereum was also hit by a large invalid block sequence. The attack was rejected by the majority of network clients, rendering it ineffective.

As you can see, bears were taken by surprise and 95% of the put (sell) instruments were purchased at $3,500 or less. Therefore, if ETH is above this price on Sept. 17, then only $8 million worth neutral-to-bearish options will be activated at the expiry.

A put option allows you to sell Bitcoin at a fixed price, on a set date. A $3,000 put option is worthless if ETH stays above this price at 8:00 UTC on September 17.

A balanced situation is represented by the call-to-put ratio

The 0.95 call/put ratio is the difference between $173 million worth (buy) options and $181 million worth (sell) options. The bird’s-eye view is not complete and some bets seem unlikely given the $3,500 current level.

If Ether’s expiry date is Sept. 17, 2013, at $3,300, then every option above that price will be worthless. In that scenario, a right to purchase ETH at $3700 will have no value.

These are the most likely scenarios based on the current Ether price. The theoretical profit at expiry is the imbalance that favors one side. Below is data that shows how many contracts will activated on Friday depending on the expiry price.

Between $3,100 to $3,300: 2,100 call vs. 20,300 put. The net result favors the protective put (bear). Between $3,300 to $3,500: There is a balance between bulls and bears. 17,600 calls vs. 2,300 put. The net result favors the call (bull), options by $55 million. Above $3,700: 17,600 Calls vs. 2,300 Puts. The net result favors call options by $85million.

This rough estimate includes call options that are only used in bullish strategies, and put options in neutral to bearish trades. Investors might have used other expiry dates or more complicated strategies.

This week is expected to show minimal volatility

Sellers and buyers will both see small gains as a moving Ether price boosts their weekly options expiry returns. It will be interesting to see if it reaches $3,500.

For perspective, the $1.6 billion open interest in the ETH monthly options expires on Sept. 24, and currently stands at $ETH. Both sides will likely concentrate their efforts on the week ahead.

Risk is inherent in every investment or trading move. Before making any investment or trading move, you should do your research.

Read more