Option Expiry Pinning

Option expiry pinning is the tendency for an underlying asset's price to gravitate toward a major strike price as an options expiration date approaches. This occurs because large open interest at a specific strike creates a gravitational pull due to the hedging activities of market makers.

As expiration nears, the gamma of these options increases, forcing market makers to buy or sell the underlying asset to remain delta neutral. This constant hedging activity keeps the price close to the strike.

In crypto, where options markets are growing, this effect is becoming more visible. It is a predictable market anomaly that traders can exploit or must account for in their risk models.