350,000 Ethereum (ETH) Options with $3,200 Max Pain Point to Expire Today

Given Ethereum’s ongoing price trajectory, the approval of spot Ethereum ETFs in the US Yesterday, May 23, seems like a buy-the-rumor, sell-the-news scenario. With Ethereum down over 4%, approximately 350,000 ETH options are set to expire today, Friday, May 24.

These soon-to-expire ETH options have a Max Pain price of $3,200 and a Put Call Ratio of 0.58, and they have a staggering notional value of $1.3 billion. 

Effects of Ethereum ETFs

The Max Point signifies the price level at which option holders would experience the maximum financial loss. Meanwhile, Ethereum has witnessed considerable volatility leading up to Today’s expiration.

Ethereum recently recorded significant rallies due to speculations surrounding a potential spot ETH ETF approval. Ether soared above $3,000, surpassing the $3900 threshold and nearing $4000 as traders accumulated coins anticipating a bolder rally. 

However, just after the spot Ethereum ETF launch, ETH’s rally halted, replaced by a 4% decline. Ethereum now trades around the $3,700 threshold. Despite this drop, Ethereum has shown strong performance in recent weeks, often outpacing Bitcoin’s rally.

This bullish sentiment was primarily driven by advancements in ETF developments, culminating in a dramatic 20% surge in Ethereum’s price within a single day.

Ethereum’s short-term option Implied Volatility (IV) reached 150% during this period. This was significantly higher than Bitcoin’s IV for the same period, raising traders’ expectations for price movement.

In the meantime, analysis of block trading and market structures reveals a sustained bullish sentiment for Ethereum despite the recent dip.

However, maintaining high IV levels consistently for each primary term has proven challenging. This scenario suggests that while the market is optimistic, it is also volatile and unpredictable.

With this backdrop, traders might consider calendar spreads a more favourable strategy. These spreads can help manage risk and capitalize on volatility without relying solely on sustained high IV levels. They typically involve buying and selling options with different expiration dates.

Notably, the approval and launch of the Ethereum ETF had a notable impact on the market, leading to increased volatility. Just before the ETF approval, Ethereum’s price significantly swung, resulting in over $132 million in long liquidations.

This liquidation event highlights the risks and rapid changes in market sentiment that can occur during such high-profile developments.

Potential for Sell-Off or Profit-Taking Activities

As the 350,000 Ethereum options expire Today, market participants will closely watch the price action around the Max Pain point of $3,200.

Meanwhile, crypto analyst Ali Martinez has observed increasing Ethereum deposits into digital asset exchange wallets. This trend suggests that Ethereum holders might prepare for a significant sell-off or an increase in profit-taking activities.

Further, the Tom DeMark (TD) Sequential indicator flashes a sell signal on Ethereum’s daily chart. A green nine candlestick has appeared on the daily chart, suggesting increased sell pressure. This could lead to a price retracement between one to four daily candlesticks. It could also trigger a new downward trend before the uptrend can resume.

Despite these bearish signals, the recent price correction in Ethereum might present a buy-the-dip opportunity for long-term investors. Historically, such corrections have been seen as entry points by those with a long-term perspective on Ethereum’s potential.

While the US SEC has approved 19b-4 filings for an Ethereum ETF, the S1 registration is still pending. This registration process is expected to take a few more weeks. The funds are awaiting official listings before a notable inflow is recorded, which may trigger a rally.