A massive $40,000 Bitcoin put option has emerged as the second-largest strike by open interest on Deribit ahead of the February 27 options expiry, signaling that traders are paying top dollar for insurance against a catastrophic crash that would see Bitcoin lose another 40% from current levels.
The positioning reveals a market gripped by fear. With roughly $490 million in notional value tied to the $40,000 strike, institutional and retail traders alike are hedging against a worst-case scenario that seemed unthinkable just four months ago when Bitcoin traded at all-time highs above $100,000.
TL;DR
- The $40,000 BTC put option holds $490M in notional value — the second-largest strike by open interest
- Roughly $7.3 billion in Bitcoin options notional is set to expire on February 27
- Max pain sits at $75,000, far above the current ~$67,000 spot price
- Calls still outnumber puts overall (63,547 vs 45,914), but downside hedging has intensified dramatically
- ETF holders and treasury firms are reportedly among those buying crash protection
The $40,000 Put: What It Means
Options are derivatives that give holders the right, but not the obligation, to buy or sell Bitcoin at a predetermined price before a specified expiry date. Put options act as insurance against price declines — they pay out if Bitcoin falls below the set strike price. When a $40,000 put becomes one of the most heavily positioned contracts in the market, it tells you that a significant number of traders are willing to spend real money protecting themselves against a move that would represent a further 40% decline from current levels.
According to data from Deribit, the Dubai-based options exchange owned by Coinbase, approximately $7.3 billion in Bitcoin options notional value is set to expire at the end of the month. The sheer size of this expiry — the largest of 2026 so far — has amplified the significance of the positioning data.
Max Pain Far Above Spot
The max pain level for the February expiry sits at $75,000, roughly $8,000 above the current spot price. Max pain refers to the price at which the greatest number of options expire worthless, minimizing payouts to option buyers and maximizing gains for options sellers. With Bitcoin trading well below this level, the current market dynamics favor put holders and create a complex dynamic for market makers who may need to hedge their own exposure.
While calls still outnumber puts overall — with 63,547 call contracts versus 45,914 put contracts — the heavy concentration of positioning at deep out-of-the-money put strikes tells a story of genuine fear. This is not normal portfolio hedging. A $40,000 strike, when Bitcoin is trading at $67,000, represents a bet on a true market collapse.
Who Is Buying the Protection?
Market participants with long-term Bitcoin exposure appear to be among the primary buyers of downside protection. According to Wintermute, the average Bitcoin ETF investor is now sitting on a 20% paper loss, creating a psychologically vulnerable position. When losses reach this threshold, the incentive to buy insurance against further declines becomes compelling — better to spend 2-3% of portfolio value on puts than risk watching holdings evaporate entirely.
The head of over-the-counter trading at Wintermute noted that crypto derivatives traders are actively “playing defense,” buying downside protection against potential drops. This behavior has become more pronounced since the February 5 flash crash, when Bitcoin suffered its fastest single-day decline since the FTX collapse, with a -6.05 standard deviation move on the rate-of-change Z-score.
Balancing Rebound Exposure With Downside Hedges
The options market is not uniformly bearish. The fact that calls outnumber puts suggests that many traders are maintaining exposure to a potential rebound while simultaneously hedging against the downside. This straddle-like approach — owning calls for upside participation and puts for crash protection — is characteristic of markets where directional conviction is low but volatility expectations are high.
The $75,000 call strike holds $566 million in notional value, making it the largest single position. For this to pay off meaningfully, Bitcoin would need to rally roughly 12% from current levels in the week remaining before expiry — a tall order given the current market sentiment, but not unprecedented in crypto markets.
Broader Market Context
The options positioning must be understood against the backdrop of a brutal February for crypto. Bitcoin is down roughly 24% year-to-date and has suffered five consecutive weekly declines for the first time since 2022. The selloff has been driven by a toxic combination of Trump tariff uncertainty, massive institutional ETF outflows, AI sentiment contagion, and forced leverage liquidations totaling $3 to $4 billion.
Crypto-specific casualties are mounting. BlockFills, a Chicago-based crypto lender backed by Susquehanna, suspended customer withdrawals and is exploring a sale after suffering $75 million in lending losses. Crypto exchanges Coinbase and Gemini reported disappointing fourth-quarter results. The industry sentiment has shifted decisively negative, with Bitwise research analyst Danny Nelson declaring, “We’re certainly in a Crypto Winter.”
On the policy front, there are glimmers of hope. White House-hosted talks on the digital asset market structure bill have shown incremental progress, and the regulatory environment for crypto in the United States remains the most favorable it has ever been. But for options traders pricing the near term, macro headwinds and geopolitical risks — including Polymarket odds of U.S. military action against Iran above 50% — are dominating the calculus.
Why This Matters
The $40,000 put is essentially a market-priced alarm bell. When sophisticated traders are willing to tie up nearly half a billion dollars in notional value on a bet that Bitcoin could halve from its current price, it signals genuine concern about tail risk. For investors, this positioning data serves as both a warning and a potential contrarian indicator — the last time put positioning was this extreme was during the COVID crash of March 2020, which ultimately marked the bottom of that cycle. The key question is whether the current hedging activity proves prescient or proves to be the kind of peak fear that precedes a reversal.
Disclaimer: This article is for informational purposes only and does not constitute financial advice.
490M in notional on a 40k strike. someone is paying serious premium for insurance they probably wont need. classic peak fear behavior
7.3 billion in options expiring and people wonder why volatility is insane right now. this is literally the biggest expiry of 2026
max pain at 75k while spot is at 67k. the market makers are going to have a very interesting expiry week
calls still outnumber puts overall though. the 40k put gets all the headlines but the real story is that most positioning is still bullish
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