Bitcoin Price at Options Expiration and Conspiratorial Theories
*Special Thanks to Black Bird for helping me pin down information regarding time of options expiry.
This article is a continuation and an update to the newsletter defining the relationship between Bitcoin options and the price of Bitcoin.
Today, April 30th, at 8am UTC (4am EST) was the exact expiry day and time of Bitcoin options. This time is marked on the below chart with a vertical blue line. A horizontal purple line at the $54,000 price point marks the "Max Pain Price", or the price where most options contracts will expire worthless. Bitcoin opened at $54,500 at the expiry time.
I have shown the following chart before and I will show it again; the below chart details the strike prices of options contracts expiring today on April 30th. Put options contract sellers make the most money if Bitcoin price is above the strike price of the contract and call options contract sellers make the most money if Bitcoin price is below the strike price of the contract. As stated in previous newsletters, the majority of contracts are being sold by "Market Makers" who hold enough bitcoin and cash to heavily influence the price of bitcoin whenever they wish.
I feel like I'm beating a dead horse here, but I believe these options not only have a major effect on month end Bitcoin prices, but are the cause of much of the volatility. After contract expiration on the last Friday of every month Bitcoin is allowed to rise in price very quickly to give the impression of a major bull run. I believe that at the start of this price increase much of the purchasing is done by the Market Makers themselves, because they are able to "buy the dip" and want to give contract buyers an incentive to purchase call options contracts at high strike prices. Contract buyers FOMO purchase these high strike prices thinking that prices will increase for a longer period of time than they actually do. Once there is approximately 2 weeks left before expiration, the Market Makers sell all the bitcoin they purchased during the dip, profiting quite a bit. This sets off a chain reaction from pattern traders and bot trading that drops the price down to near the desired Max Pain Price point. If it drops too far or too little, the Market Makers have enough time to tweak the price to their liking in the final days before options expiration.
We need to take advantage of this! I will be editing the strategy page on this website to detail the best way to bot trade with this information. Essentially, we want to turn off buying and turn on selling when we are near or at a new All Time High (ATH) price and once it dips down to near the Max Pain Price we want to turn on buying and turn off selling. We let it rise all the way up and repeat the process. The beauty of the bot is that it keeps you greatly diversified and buys the big dips for you. You help maximize profits by timing when the bot is allowed to buy and sell, but let the bot spread out your investment. Every cycle some coins have 50+% gains. If you buy 1 or 2 coins, chances are you won't have that coin. With our signals some of your portfolio will be the highest earning coins. In addition, if a coin fizzles out and that's the only coin you bought, you're shit out of luck. By being diversified it's only a small portion of your portfolio and it won't have a major impact on your gains.
I will be relaying the buying and selling timing in 3 locations: I will keep it updated on the strategy page, I will mention and pin it on our Telegram channel and I will state it on our Discord channel in the crypto-talk chat room. Currently our Telegram channel is quite active and Discord is not, but I am always available on both mediums and I hope our community develops on both.
The goal of the Booyah Traders community is to gather a group of traders of all experience levels to share information, strategies and analysis. Everyone should feel free to provide any analysis and ask any questions. We are an open group and we will not pass judgement. Everyone had to start somewhere and there are no stupid questions. The more I learn about any subject the more I realize I don't know. So, if you're not with us on social media yet, join us!