Options Expiry Pinning

Options expiry pinning is a market phenomenon where the price of an underlying asset tends to gravitate toward a specific strike price as the expiration date approaches. This often occurs because market makers who have sold large volumes of options need to hedge their positions, and their actions can inadvertently influence the spot price.

As the price nears a strike with high open interest, the hedging activities of these market makers ⎊ buying or selling the underlying to remain delta-neutral ⎊ can create a gravitational pull on the asset's price. In the crypto market, where liquidity can be thinner than in traditional finance, this effect can be quite pronounced, leading to localized volatility and potential price manipulation concerns.