Crypto options expiry and 'max pain' explained for Indians
With about $18 billion of Bitcoin and Ether options expiring on Friday, here is what max pain, put-call ratio and open interest mean, and what they don't.
Headlines about a "record" or "massive" crypto options expiry turn up every few months. Friday, 25 September, brings another: Deribit will settle about $15.9 billion of Bitcoin options and $2.1 billion of Ether options at 08:00 UTC (1:30 pm IST). If the terms in those headlines leave you confused, this guide explains them in plain English.
Options in one paragraph
An option is a contract. Whoever buys it gets the right, but not the obligation, to buy or sell an asset at an agreed price, called the strike, on or before a fixed date, called the expiry. There are two basic types:
- A call gains value when the price climbs above the strike, so it is a bet on prices going up.
- A put gains value when the price drops below the strike, so it is either a bet on a fall or a kind of insurance for someone who holds the asset.
The buyer pays a premium at the start. The seller keeps that premium but carries the risk if the market moves the wrong way for them.
How expiries can still shift prices
When a big chunk of open interest disappears in one go, the hedges linked to it are unwound too. That can cause sharp moves in the hours around settlement and change how volatile the market is afterwards. Strikes with a lot of open interest, like $85,000 and $90,000 for this expiry, can behave like short-term magnets or walls for the price.
Decoding the headline terms
- Notional value. This is the value of the coins the contracts are based on. A figure of $18 billion notional does not mean $18 billion will actually be paid out.
- Open interest. This counts the contracts that are still open. Friday's expiry will remove about 37% of Deribit's Bitcoin open interest.
- Put-call ratio. This is the number of puts divided by the number of calls. A ratio under 1 means calls outnumber puts. For Friday it is about 0.69, which leans bullish.
- Max pain. This is the price at which the largest number of options would expire worthless, which is where option buyers would lose the most. For this expiry it sits at about $75,000.
Can max pain forecast the price?
Not with any consistency. The idea is that market makers who have sold options hedge in a way that drags the price towards max pain as expiry approaches. In reality, spot and futures markets are far bigger than the options market, and news usually has more influence. This week's jump in US bond yields is a good example. Use max pain as one clue about how traders are positioned, not as a prediction.
Points for Indian investors
- You probably do not need options. If you just hold Bitcoin, an expiry is background noise, so do not trade because of it.
- Selling options is riskier than it looks. Collecting premium feels steady until one sharp move creates losses much larger than all the premium you earned.
- Know your platform. Trade on platforms registered with FIU-IND and be wary of offshore apps. India's FIU has taken action against unregistered platforms this year.
- The tax is not simple. India's treatment of profits from crypto derivatives is less settled than it is for spot trades, so keep complete records and speak to a chartered accountant.
Once you know the vocabulary, expiry headlines become much less alarming. To see when the next weekly, monthly and quarterly expiries fall, use our Bitcoin options expiry calendar. This guide is educational and is not investment advice.
This article is AI-assisted, educational and general in nature. It is not financial advice and never a guarantee of profit. Every trade is at your own risk on your own exchange. See our risk disclosure and editorial policy.
