Ether put options concentrate at $2,200. Is it a hedge or a bearish indicator?

Ether options open interest ahead of Friday's end-of-month expiry shows a concentration of puts at a strike price of $2,200. While one analyst said this could be a hedge of a bullish position, it could also indicate a bearish short-term outlook in the second largest digital asset by market capitalization.

This comes as ether recently changed hands above $3,000 for the first time since April 2022 as speculators take positions on whether the U.S. Securities and Exchange Commission will approve of a spot ether ETF in the coming months. 

Options are derivative contracts that give a trader the right but not the obligation to buy or sell the underlying asset at a predetermined price on or before a specific date. A call option gives the right to buy, and a put offers the right to sell. It is assumed that a trader who buys put options is implicitly bearish on the market, while a call buyer is bullish.

Investors employing hedging strategy

Buildup of bearish position

However, Kooner did not rule out what put positions often indicate: that the increase in positions at that strike price could be due to a negative bias over the next few days.

"The buildup of ether puts at a $2,200 strike price and calls clustered at $2,400 may suggest a bearish outlook in the short term, with traders preparing for potential price declines," Kooner said.

Ether options open interest ahead of Friday's end-of-month expiry shows a cluster of calls at $2,400. Image: Deribit.

Ether volatility causes spike in liquidations

In the past 24 hours the price of ether broke through the $3,000 mark, before posting a sharp pull-back to trade at $2,917 at 1:35 p.m. ET, according to The Block's Price Page.

In the past 24 hours the ether price broke through the $3,000 mark, before posting a sharp pull-back. Image: The Block.

In the the perpetual futures markets, fluctuating price action in the past 24 hours has caused a spike in liquidations of ether positions, totaling over $47 million, according to Coinglass data.

Both long and short positions experienced comparable losses, with more than $24 million in shorts being liquidated and over $22 million in longs being wiped out.

The GM 30 Index, representing a selection of the top 30 cryptocurrencies, has decreased by 1.80% in the past 24 hours, now at 112.32.