Ethereum hits $3,800, strengthening bulls' grip at Friday's ETH options expiry

Ethereum (ETH) entered a slightly bullish channel earlier this month, with the price now revisiting $3,800. Despite the recent turmoil, ethereum bulls stand to book a $53 million profit when options expire this Friday.

Investors also seem unimpressed by ethereum’s recent underperformance against bitcoin, with ethereum up 265% so far. If Ethereum can hold above $3,600 on Friday, 99% of the $180 million put option will become worthless.

Competitors in Ethereum smart contracts continue to put pressure on the leading network, with average gas fees still above $20 on Ethereum at the time of writing. Polkadot (DOT) plans to start a sidechain auction on November 11, which will support new token offerings, decentralized finance (DeFi) applications, and Internet of Things (IoT) solutions, all through a trustless cross-chain network bridge.

This week, Binance Smart Chain revealed plans to launch a $1 billion fund to accelerate adoption across the cryptocurrency industry. Investors often interpret potential incubation activities backed by blockchain projects as bullish on their native assets, and BNB prices have risen at least 30% since the announcement.

Bears do not expect price to exceed $3,300

Judging by the recent negative headlines, it is possible to understand why bears are betting 88% of their bets at or below $3,300. If the bulls were less greedy, they could dominate the $365 million in options expiring on Friday.

The October 15 expiration is perfectly balanced between call (buy) and put (sell) options based on the long-short ratio. This requires further details, though, as it depends on the price at maturity.

At first glance, both parties hold about $180 million worth of ETH options, as indicated by the call-to-put ratio of 1.03.

However, this indicator is deceptive, as the recent Ethereum rally may have wiped out most of their bearish bets. For example, only $6.6 million in put (sell) options would be available if the price of Ethereum held above $3,500 at 8:00 AM (UTC) on Friday.

Bulls are comfortable at $3600

Any expiration above $3,500 is a bear trap, although the $32 million advantage shouldn't be enough to cause a loss. To put that into perspective, Ethereum monthly options have over $800 million in open interest.

Given current price levels, here are the four most likely scenarios, as an imbalance in either party's favor represents a potential theoretical profit after expiration.

The data shows how many options on long (call) and short (put) instruments will be exercised on October 15.

• Between $3300 and $3500: 7450 calls versus 3550 puts. The net result was in favor of the shorts at $13 million.
• Between $3,500 and $3,600: 11,150 calls versus 1,900 puts. The net result favored the bulls at $32 million.
• Between $3,600 and $3,800: 15,400 calls versus 600 puts. The profit of the bulls increased to $74 million.
• Above $3,800: 27,450 calls to 0 puts. Bulls dominated, taking profits of $104 million.

This rough estimate takes into account call (buy) options used in bullish strategies and put (sell) options exclusively used in neutral to bearish trades. However, traders can sell puts, effectively gaining positive exposure to Ethereum above a certain price. But unfortunately, there is no easy way to estimate this effect.

Bears need prices below $3,500 to balance

With Ethereum trading above $3800, the profit for the bulls increases to $104 million, thus adding $30 million from the current estimated gain of $74 million. On the other hand, from the perspective of the bears, there would be a gain of $61 million if the price is pressed below $3,500, as indicated by the above estimate.

With just a few hours until the October 15 expiration, bears will have a hard time squashing the current bull run. Regardless of the competition and high gas fees facing the Ethereum network, investor demand for DeFi and NFTs appears to be enough to keep Ethereum on an upward trend.