Expiration Volatility

Expiration volatility refers to the increased price fluctuations and trading activity observed as a derivative contract approaches its settlement date. As the time to expiration shortens, market participants adjust their portfolios, leading to intense buying or selling pressure, especially if large open interest positions need to be closed or rolled.

This phenomenon is frequently driven by gamma hedging, where market makers must aggressively buy or sell the underlying asset to remain delta neutral as the spot price moves toward strike prices. In crypto markets, this is often amplified by low liquidity and the high concentration of leveraged positions, which can lead to rapid liquidations and cascading price movements.

Traders often monitor open interest data to anticipate these volatile windows.