Options Expiry
Options expiry is the date and time at which an options contract settles and ceases to exist. At that moment each contract either pays out based on the difference between the market price and its strike price, or expires worthless.
What happens at expiry
An option gives its holder the right, but not the obligation, to buy (a call) or sell (a put) an asset at a fixed strike price. At expiry, the exchange compares a settlement price with each strike. A call with a strike below the settlement price, or a put with a strike above it, is in the money and pays the difference. All others expire worthless, and the buyer loses the premium paid.
Most crypto options are cash-settled: no coins change hands, only the profit is paid out. The settlement price is usually an average of prices across several exchanges over a short window, which makes it harder to manipulate with a single trade.
Weekly, monthly and quarterly expiries
Crypto options exchanges list contracts with daily, weekly, monthly and quarterly expiries. The largest share of open interest usually concentrates on the last Friday of each month, and especially of each quarter. On the biggest crypto options venue, contracts commonly expire at 08:00 UTC.
Why large expiries get attention
Market makers who sell options often hedge by trading the underlying asset or futures. As expiry approaches, the size of those hedges changes quickly, and when contracts expire the hedges are unwound. Some traders believe this can add volatility around expiry or pull the price towards strikes with heavy open interest, a theory linked to the idea of max pain.
Say 2 billion dollars of options expire on one Friday, with large open interest clustered at one strike. Commentators may predict that price will gravitate to that strike. Sometimes it does, often it does not, because spot and futures trading are usually far larger than any hedging flow.
Risks and common mistakes
Headline figures like the notional value of an expiry overstate its importance, because many contracts expire far out of the money and require no hedging. Option buyers should remember that time decay accelerates near expiry, so an option can lose most of its value even if the price moves in the right direction too late.
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Frequently asked questions
Does options expiry move the price of Bitcoin?
It can contribute to short-term volatility as hedges are adjusted, but there is no reliable pattern. Many large expiries pass with little effect.
What happens to my option at expiry?
If it is in the money, you receive the settlement value, usually in cash. If it is out of the money, it expires worthless and the premium you paid is lost.
When do crypto options expire?
It depends on the contract and exchange. Many expire on Fridays, with the largest expiries at the end of each month and quarter.
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