$600 million worth of bitcoin options expire on Friday, giving BTC a reason to close below $16,000.

No one can blame Bitcoin (BTC) bulls for placing bets at $20,000 and higher for the $600 million weekly options ending November 18. After all, this level has been a strong resistance since October 25 and held for almost two weeks.

However, the main scenario changed abruptly on November 8 after a liquidity crunch halted withdrawals on the FTX exchange. The move caught traders by surprise, and more than $290 million of leveraged buyers were canceled in 48 hours.

Bitcoin/USD price index, 12-hour chart. Source: TradingView

The market quickly adjusted to the news, reaching $15,800 to $17,800 over the past seven days. Currently, investors fear that contagion risks could force other major players to sell their cryptocurrency positions.

FTX had significant deposits from major industry players, so its demise meant that other participants would also face significant losses. For example, BlockFi had a $400 million credit line with FTX US. On November 15, collateralized income platform SALT announced significant losses from the collapse of FTX and subsequently halted withdrawals.

Similar events occurred on Japan’s Liquid cryptocurrency exchange, raising the level of uncertainty throughout the market.

The options expiration on November 18th is especially relevant as Bitcoin bears could take a $120 million profit by burying BTC below $16,500.

Bulls placed their bets at $20,000 and up

Open interest for the weekly options expiration on November 18 is $600 million, but the actual number will be lower because the bulls are overly optimistic. These traders missed the mark by placing bearish bets at $18,000 and higher, while BTC was dumped after the FTX bankruptcy.

Bitcoin options combine open interest for November 18. Source: CoinGlass

A call-to-put ratio of 1.00 indicates a perfect balance between $300 million of put (put) open interest and $300 million of call (call) options. However, with Bitcoin close to $16,500, most bull bets will be worthless.

If the price of Bitcoin remains below $17,500 at 8:00 AM on October 21st, only 10% of these call (call) options will be available. This difference occurs because the right to buy Bitcoin at $18,000 or $19,000 is worthless if BTC is below the expiration price.

The bulls need a pump above $18,000 to get ahead

Below are the four most likely scenarios based on current price action. The number of bitcoin option contracts available for call (bull) and put (bear) instruments on November 18 varies depending on the strike price. The imbalance in favor of each party constitutes the theoretical profit:

  • Between $15,500 and $16,500: 400 calls and 7,900 calls. The net result favors $120 million worth of sell (bear) instruments.
  • Between $16,500 and $17,500: 1700 calls and 6100 calls. The net result is in favor of put (bear) instruments worth $75 million.
  • Between $17,500 and $18,000: 2500 calls and 5000 calls. The net result favors put (bear) instruments worth $45 million.
  • Between $18,000 and $18,500: 4500 calls and 3100 calls. The net result favors $25 million worth of call (bull) instruments.

This crude estimate takes into account put options used in bear bets and call options in neutral-to-bull trades only. However, this oversimplification ignores more complex investment strategies.

For example, a trader could effectively sell a put option with a positive effect on Bitcoin above a certain price, but unfortunately there is no easy way to quantify this effect.

Related: Bitcoin Price Falls to $16.4K on Genesis Troubles as Execs Defend GBTC

It should come as no surprise that the price of BTC has fallen below $16,000

Bitcoin bears need to drop below $16,500 to take a $120 million profit. The bulls’ best-case scenario requires a 10% pump above $18,000 to turn the tables and earn $25 million.

Given that Bitcoin margin and options instruments are showing low confidence to recapture the $18,500 support, the most likely outcome for Friday’s expiration is in favor of the bears. The bulls might be better served by throwing in the towel and focusing on the Nov. 25 monthly options expiration.