Key Insights

• The net gamma exposure of dealers in the Deribit-listed ether options market is negative between $4,000 and $4,400.
• This situation might trigger a self-reinforcing cycle, potentially pushing prices to $4,400.

A hidden indicator from the derivatives market indicates that Ether (ETH) could soon rally and reach prices around $4,400. The main focus is on the net gamma exposure of market makers in the Deribit ether options market. Gamma is crucial for options traders, highlighting how an option’s delta adjusts with market movements.

At present, there’s significant short gamma accumulation between the $4,000 to $4,400 strike prices. As Ether surpasses $4,000, dealers could purchase the asset to hedge their positions, creating a feedback loop that escalates prices quickly to $4,400, where gamma dynamics would shift to a positive state, stabilizing price volatility.

“If market momentum is sufficient to breach $4,000, we can expect dealers to become net buyers of ETH at increased prices, possibly leading to a rapid rally to $4,400, which is a significant gamma inventory threshold,” said Greg Magadini, Director of Derivatives at Amberdata.