What is an Option?
An option is a financial contract that grants the buyer the right, but not the obligation, to purchase or sell an asset at a predetermined price on a specified date.
The counterparty does not have this choice: if the holder requests execution, they cannot refuse the transaction.
This poses a risk for the seller: a sudden adverse market move can lead to significant losses. To mitigate this risk, the buyer pays a premium upfront, which is non-refundable regardless of the outcome.
If the contract expires without payout, the entire premium remains with the seller. Conversely, if there is a payout, the funds received will cover obligations to the holder either fully or partially.
Options are categorized as derivatives. The asset price to which the contracts are linked is referred to as the underlying asset — for instance, a stock, oil, or bitcoin. Trading platforms like Deribit do not conduct transactions with the actual coins; the holder receives only the payout amount — in BTC or USDC.
The main parameters of the option are indicated in the instrument's name. For example, the option BTC-25DEC26-100000-C has the number 100,000 representing the strike price in dollars.
The designation 25DEC26 specifies the expiration date — December 25, 2026. The letter C at the end indicates a call option, which grants the right to purchase the asset.
On the morning of September 24, the premium was approximately 0.023 BTC, or about $1960. One contract corresponds to one bitcoin, which was trading at around $84,100 at that time.
The outcome of the transaction depends on the price of the underlying asset at the time of settlement. If on December 25, the first cryptocurrency is priced at $110,000, the seller will pay the difference from the strike price — $10,000. Considering the premium received, their loss would amount to about $8,000 — exactly the profit earned by the buyer.
The investment will be profitable only if bitcoin appreciates to around $102,000 by expiration, representing a 21% increase from the September 24 level. If the prices do not reach $100,000, the option will expire worthless, and the holder's loss will be limited to the premium paid to the seller.
Payout and financial result for the buyer of a call option on bitcoin with a strike price of $100,000 depending on the price at settlement. Source: ForkLog, based on data from Deribit.The buyer can choose to close their position before December 25 and liquidate early. Until expiration, the option's price is influenced by the bitcoin price, the time until settlement, and the expected market volatility. Therefore, the premium fluctuates daily, and the data provided above is valid only for prices as of the morning of September 24.
How Do Options Differ from Futures?
Futures are contracts that bind both parties to complete a transaction at a fixed price on the expiration date.
The buyer of an option pays a premium for the right, not the obligation, to buy or sell the asset. Only the counterparty must fulfill the terms: if the holder is in profit on the settlement day, the exchange executes automatically; if not, the transaction concludes without any payouts.
The difference between these instruments is illustrated by the example of December derivatives based on bitcoin.
On the morning of September 24, a futures contract expiring on December 25 was valued at around $85,230. If on the settlement day the prices rise to $110,000, the buyer of such a contract would make $24,770 (per one bitcoin position). In this scenario, a call option with a $100,000 strike would yield about $8,040 in net profit after accounting for the $1,960 premium.
If bitcoin falls to $70,000, both instruments would incur losses, but of different magnitudes. The futures position would result in a loss of $15,230, while the option would expire worthless: the holder would only lose the $1,960 paid to the seller.
Financial result for the buyer of December futures and a call option on bitcoin depending on the price at settlement. Source: ForkLog, based on data from Deribit.However, the limitation on losses comes at a cost. If bitcoin rises to $95,000 by expiration, the futures contract would yield about $9,770 in profit, while the call option with a $100,000 strike would expire worthless, causing the buyer to lose the $1,960 premium.
This discrepancy arises from the structure of the contracts. The outcome of trading with futures directly correlates with changes in the price of the underlying asset. In contrast, the option buyer's losses are limited: in adverse scenarios, they only lose the premium.
There are also different margin requirements. When opening a futures position, both parties must provide margin. If losses nearly consume this collateral, the exchange automatically closes the trade.
In the case of an option buyer, no additional funds beyond the premium are required: they have already covered their potential losses in advance. The other party to the transaction, however, may owe the holder a sum far exceeding the amount received. Thus, the exchange also requires margin collateral from the option seller.
In the crypto market, however, the most popular instrument is not the traditional futures contract, but the perpetual ("perp"). Such contracts do not have an expiration date, and their prices are tied to the current market price of the asset through a mechanism of regular payments between the parties — the funding rate.
What Types of Options Exist?
There are two types of options. A call option gives the right to purchase the underlying asset at the strike. A put option is structured oppositely: its holder can sell the financial instrument at a predetermined price.
For instance, on the morning of September 24, a put on bitcoin with a strike of $80,000 and an expiration date of December 25 was priced at around 0.047 BTC, or approximately $3,990. If on the settlement day prices drop to $70,000, the put owner would receive $10,000 from the seller. After accounting for the premium, their net profit would be around $6,010 ($10,000 - $3,990).
This contract acts as insurance against a price drop. The buyer of a put option secures a minimum selling price for their bitcoins, and the $3,990 is the cost of this protection.
Options are also classified based on the position of the strike relative to the current price of the underlying asset. If the first cryptocurrency is priced around $84,100, a call with a strike of $65,000 gives the right to buy it at $19,100 below the market. This option is considered “in the money”. The corresponding difference is referred to as intrinsic value.
If the settlement occurred at the same price, a call with a strike of $100,000 would yield nothing for the holder, even though such a contract was priced around $1,960 in the market. This is an option “out of the money”. If the current price nearly matches the agreed level in the contract, this instrument is termed “at the money”; in practice, this refers to the closest market price to the strike price.
For puts, the situation is reversed: at the same prices, the right to sell at $100,000 is “in the money” (with a difference of about $15,900), while the right to sell at $80,000 is “out of the money.”
Position of call and put strikes on bitcoin relative to the current price. Source: ForkLog, based on data from Deribit.The premium of an option consists of intrinsic and time value. On the morning of September 24, a call with a strike of $65,000 traded for about $20,820. Deribit calculates option prices not from the spot, but from the price of the December futures — approximately $85,230, which means the intrinsic value of this call was about $20,230. The remaining ~$590 was what the buyer paid for the time until expiration. As expiration approaches, the time value diminishes until it eventually reaches zero.
Options also differ in their exercise style. On Deribit and CME, contracts based on crypto assets are European: holders cannot demand settlement until expiration.
At CME, most of these instruments are options on futures: the underlying asset is not bitcoin itself but a derivative contract. Consequently, exercising the contract provides the holder with a position in this futures instrument. Monthly series expire simultaneously with it, so the result is immediately settled in cash at the reference price.
Weekly options expire earlier, and the holder is left with an open position: they must close it manually. The Chicago Mercantile Exchange does not transfer the cryptocurrency under any circumstances.
What Strategies are Built Around Options?
Any options strategy is based on four basic positions: buying and selling call and put options.
The buyer pays a premium for the right to profit from a significant price movement in the desired direction. The seller takes this amount for themselves and hopes to profit if the market remains stable or moves in their favor.
Financial result of the four basic options positions at expiration, considering the premium. Source: ForkLog.By combining these positions, traders adjust the risk-to-reward ratio. A spread reduces the cost of betting on price movement.
For example, on the morning of September 24, a December call option at $90,000 was priced at about $4,380. If a call option at $100,000 is simultaneously sold for approximately $1,960, the position would cost $2,420. The maximum profit from this position would not exceed $7,580: if the price rises above the second strike, the profit stops increasing.
A calendar spread is constructed on the same strike but with different expiration dates: the near option is sold, and the far one is bought. This structure generates income if the prices remain at the selected level: in this case, the time value of the short position depreciates faster than that of the held contract.
A straddle bets on the magnitude of price movement regardless of direction. For instance, on the morning of September 24, December calls and puts at $85,000 together cost about $12,630; this combination will be profitable only if, at expiration, bitcoin is priced below $72,400 or above $97,600. A strangle is structured similarly, but the strikes for the call and put differ: it is cheaper but requires a more significant price swing.
Statistics from Deribit show which constructions are popular in practice. As of September 24, calendar spreads with puts accounted for 54.5% of combined bitcoin options trades, with calls at 26.5%, risk reversals at 9.6%, and put spreads at 5.2%. These figures pertain to one trading day rather than an extended period.
Sometimes open positions reveal the intentions of large participants. For instance, trader and author of the Telegram channel Coen+, Vladimir Koen, noted a concentration of calls expiring on September 4, 2026: about $185 million, or 12% of the entire series, was tied to one strike.
Judging by the volume at the $80,000 mark, this was likely not a simple bet on growth but rather a combination of several options. The maximum profit was achieved at a price of $82,000, at that very strike, while above $84,000, it became unprofitable.
The type of construction was not specified in the column; it fits the description of a proportional call spread. According to an expert's assessment, this turned the first mark into a nearby ceiling for the price — until the market surpasses the second.
Option sellers maximize their profit if, on the settlement day, prices do not reach the strikes of the sold contracts: there is nothing to pay, and all collected premiums remain with them. For instance, if on December 25 the settlement price lands between $80,000 and $90,000, the December calls at $90,000 and puts at $80,000 will expire “out of the money,” and the payments for them will entirely go to the other party of the transaction.
What is Max Pain?
The price level at which the total payouts for open options are minimized is referred to as the Max Pain level. At this price, holders of contracts receive the least, while sellers retain most of the collected premiums.
A simplified interpretation also exists: Max Pain is the level at which the highest number of contracts expire “out of the money”. Most analytical services focus on the dollar value of payouts: one call that is “in the money” by $10,000 costs sellers more than ten options that just crossed the strike by $500.
The Max Pain level is determined by how much sellers of options will pay to holders on expiration day. At each settlement price, a specific set of contracts is “in the money.” For instance, if bitcoin closes at $85,000, profits will come from calls with lower strikes and puts with higher strikes.
It is believed that the price tends to gravitate toward the Max Pain level as expiration approaches. However, this assumption remains controversial: it is unclear whether the coincidences reflect a pattern, randomness, or manipulation.
Before the expiration on September 25, 2026, Max Pain for bitcoin options on Deribit was around $75,000 — approximately $10,500 below actual prices. This single date accounted for about $15.9 billion in nominal terms, or 37% of the total open interest (OI) in bitcoin on the exchange. Each series has its level since the set of active contracts differs among them.
The Max Pain level and nominal value of bitcoin options on Deribit by expiration dates as of September 23, 2026. Source: Coinglass.How is Max Pain Calculated?
To calculate Max Pain, two sets of data for one expiration date are sufficient: a list of strike prices and the open interest for each of them.
Open interest by strikes for bitcoin options on Deribit as of September 27, 2026. Source: Deribit.Next, possible settlement prices are assessed, and for each the total amount that sellers would pay to holders is calculated. For calls, the payout equals the excess of prices over the strike, while for puts, it is the shortfall to the strike. Both values are multiplied by the number of open contracts and summed up. The price yielding the lowest total is the Max Pain.
In a hypothetical series, there are 150 calls at $80,000, 250 at $90,000, and 400 at $100,000, as well as 300 puts at $70,000, 250 at $80,000, and 100 at $85,000. If the settlement occurs at $90,000, only the holders of calls at $80,000 will receive funds: 150 contracts x $10,000 = $1.5 million. At $75,000, payments will be due for puts at $80,000 and $85,000, totaling $2.25 million.
The least amount sellers will pay occurs at $80,000: only $500,000 will be owed at the highest put strike. This price will thus become the Max Pain level for the hypothetical series.
Total payouts to option holders at different settlement prices in a hypothetical series. Source: ForkLog.In practice, calculations are conducted by analytical services, and separately for each exchange: the collection of contracts on platforms varies, leading to differing values. Due to the constant trading activity of participants, the target level may change daily or even within a day. For instance, on September 23, 2026, analysts predicted a level of $75,000 for the expiration on September 25, while Coinglass's chart that evening showed about $76,000.
The method has its limitations. It considers only the intrinsic value of options and does not account for time value. Furthermore, the calculation relies on open interest data at a specific moment, while market participants continuously adjust their positions.
Finally, OI reflects only the number of contracts and does not provide insights into the composition of the parties involved in the trades. Thus, Max Pain serves as a guideline rather than a price prediction.
Why Do Prices Tend to Gravitate Toward the Max Pain Level?
The attraction of asset prices to the Max Pain level may relate to the hedging practices of large players.
A market maker is a market participant who consistently places buy and sell orders and profits from the spread between them, rather than betting on price increases or decreases. In the options segment, they become the counterparty to clients' trades, and the accumulated risk is offset by buying or selling the underlying asset, ensuring that the outcome does not depend on the price direction. This type of insurance is referred to as delta hedging.
If a market maker primarily acquires options with strike prices near the current price, hedging forces them to sell bitcoin as prices rise and to build a position as prices fall. Such transactions dampen volatility and keep quotes near levels with the highest open interest. This effect is known as price pinning.
Conversely, if market makers mostly sell options, the mechanism works in reverse: as prices rise, they must increase their bitcoin position, and as they fall, they must reduce it. Consequently, a price movement in either direction only intensifies.
Luke Streiers, the head of Deribit, described such a situation before the expiration on September 25, 2026: dealers with short positions on calls were forced to buy coins as their prices increased.
How market maker hedging affects price at the strike. Source: ForkLog.This effect is temporary. The settlement price on Deribit is the average over the last 30 minutes before expiration, so the exchange linearly reduces the delta of expiring contracts to zero. The need for hedging gradually diminishes.
Thus, the Max Pain level does not inherently attract prices. The outcome depends on the positioning of market makers, which is not visible through OI.
The pinning effect has long been recognized in the stock market. Economists Sophie Ni, Neil Pearson, and Allen Poteshman concluded in 2005 that on expiration days, stock closing prices cluster around the corresponding option strikes. The authors attributed these accumulations to the actions of market makers and prop traders. Here, the focus was on attraction to specific strike prices rather than the Max Pain level.
The crypto market has its specifics. In 2026, the journal Finance Research Letters published an analysis of 1,059 expirations on Deribit from January 2021 to December 2023. When OI on “in the money” options was particularly high, bitcoin tended to decline on average in the hour before settlement and recovered the drop in the subsequent 120 minutes.
This V-shaped reversal was most pronounced when market makers held more sold contracts than bought ones. On such days, hedging did not suppress fluctuations but amplified them. In other words, a large expiration can not only attract prices to the Max Pain level but also push them away from it.
Why Do Crypto Market Participants Monitor Expirations?
On centralized crypto exchanges, the turnover of derivatives almost quadruples the spot volume. In August 2026, these exchanges recorded $3.40 trillion against $891 billion, or 79.3% of total trading volume on the platforms.
In March, the share of derivative instruments reached its highest level since 2023 at 76.5%, while in July it climbed to 80.3%. These figures encompass only centralized platforms, excluding DEX.
Trading volumes for derivatives and spot on centralized crypto exchanges in August 2026 and the proportion of derivatives by month. Source: ForkLog, based on data from CoinDesk Data.
Deribit remains the leading crypto exchange for trading bitcoin options. On this platform, bitcoin contracts expire daily, weekly, and monthly — always at 08:00 UTC.
The largest expirations are the quarterly series that conclude on the last Friday of March, June, September, and December. For instance, the upcoming quarterly expiration carries an approximate nominal value of $10 billion.
Open interest for bitcoin options on Deribit by expiration dates as of September 27. Source: Deribit.
A large expiration simultaneously closes numerous positions, which market makers hedge with transactions involving the underlying asset.
Deribit analysts expected that after the settlement on September 25, 2026, the pinning effect would weaken, and short-term volatility could increase: along with the contracts, the hedging that restrained or accelerated price movement would leave the market. However, in the initial days, the market remained calm: on September 26 and 27, bitcoin traded in the range of $84,000–84,600.
In December 2025, bitcoin traded for several weeks between $85,000 and $90,000. Some market participants linked this low volatility to dealer activities around major strikes, although other factors also influenced prices during those weeks. Proponents of this theory anticipated that after the closure of the annual series on December 26, the restraining effect would diminish.
Nevertheless, many view major expirations as dates after which the market landscape may shift.
Does the Settlement Price Align with the Max Pain Level?
Interest among crypto market participants in Max Pain surged following the rally at the end of 2020 and early 2021, when bitcoin often approached this level before contract settlements.
Verifying whether such attraction exists in the current market phase is straightforward: analytical services publish the corresponding levels before each contract closure. Between December 2025 and September 2026, out of six major series on Deribit, the settlement price only approached “max pain” once.
Before the settlement on May 29, 2026, the Max Pain level was set at $75,000, while the final price was $73,370 — just 2% below the benchmark.
In other instances, the discrepancies were significant. For example, for the annual expiration on December 26, 2025, the “max pain” was estimated at $95,000, while the final figure was $88,770.
Ahead of the March quarterly series, Deribit's commercial director Jean-David Pequin identified the $75,000 mark as a “point of attraction,” yet on March 27, 2026, the final value was $6,390 lower at $68,610.
In the summer, the gap was even larger: on June 26, 2026, options settled at $60,520, which was $11,480 below the $72,000 level. Ahead of this, OTC trader Wintermute's Jasper De Mer noted that in recent expirations, quotes did not “pin” to the settlement levels as many market participants expected.
Conversely, before the expiration on August 28, 2026, Deribit indicated a Max Pain around $70,000, while the final price was at $79,680. On September 25, the settlement occurred at $83,930 — nearly $9,000 above the benchmark of $75,000 identified by analysts.
Max Pain level before expiration and settlement price of bitcoin options on Deribit. Source: ForkLog, based on data from Deribit, CoinDesk, Decrypt, and ForkLog.Thus, prices can deviate significantly from the Max Pain level, in either direction.
How is Max Pain Useful for Crypto Analysts?
Max Pain is best understood not as a prediction but as a map of positions in the options market. The level indicates at which settlement price sellers will pay holders the least, highlighting where the primary open interest is concentrated.
The most informative aspect is the distance between the current price and this level. Proponents of the concept believe that a large gap may foreshadow price movement toward “max pain.” However, this effect typically manifests closer to the settlement date, and the benchmark shifts daily.
On September 23, 2026, bitcoin traded about $10,500 above the Max Pain level of $75,000. This difference primarily reflected a bias in positions toward calls: the price did not reach the benchmark, and on September 25, the settlement occurred at $83,930.
Other metrics from the options market also provide valuable insights. The put/call ratio indicates whether participants are more focused on hedging against declines or betting on increases. On September 24, 2026, Deribit’s ratio was 0.6 for OI and 1.03 for daily trading volume: in accumulated positions, calls predominated, while puts were more common in new trades.
It is also helpful to monitor strikes with the highest open interest. Before the expiration on May 29, 2026, analysts noted bitcoin was situated between Max Pain at $75,000 and a “wall” of calls at $80,000.
The key question is on which side the market makers lie. OI does not reveal this, but analytical services assess it indirectly through gamma exposure (GEX). With positive GEX, hedging dampens fluctuations and increases the chances of “pinning” to major strikes, while negative GEX amplifies them.
The level at which this indicator changes sign is referred to as the gamma flip. Such assessments are based on assumptions about which participants are on which side of the trades, thus limiting their accuracy.
What to check before a major expiration. Source: ForkLog.Max Pain is calculated for a specific series and loses significance after its expiration: thereafter, the next date's indicator becomes relevant. In conjunction with other metrics, it helps to understand the balance of power leading up to the settlement, but it does not replace the analysis of spot demand, ETF inflows and outflows, and the macroeconomic backdrop.
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