Options contracts tied to ether (ETH) worth $2.3 billion are set to expire on dominant crypto derivatives exchange Deribit this Friday.

Ahead of the pivotal quarterly settlement, the market is witnessing a low spread between Deribit’s forward-looking 30-day implied volatility index for ether (ETH DVOL) and bitcoin (BTC DVOL).

According to Deribit, the negative spread indicating relative ether stability results from an increased institutional interest in “overwriting” or selling ether call options. The dynamic has set the stage for major market shifts around Friday’s expiry.

Overwriting involves selling or writing overvalued call options or bullish derivative bets, typically against long-term buy-and-hold positions. It’s a popular way of generating additional income on top of spot market holdings. A call seller offers protection to the buyer from price rallies in return for a fixed compensation.

Since the beginning of the year, the market has seen large reflective overwriting flows in ether, which have lowered ETH implied volatility. Implied volatility (IV) refers to traders’ expectations for price turbulence and is positively impacted by the demand for options.

With June contracts set to settle this Friday, overwriters may roll over their positions. In other words, short positions expiring on Friday may be squared off and moved to the July or September expiry. That could cause significant shifts in how IV is priced in the bitcoin and ether markets.

“ETH has witnessed substantial institutional selling activity [in call options], earning a trader the moniker of the ‘ETH overwriter’ aka an ETH volatility selling whale! Remarkably, this has resulted in a scenario where DVOL (implied volatility index similar to VIX) in ETH is lower than that of BTC,” Deribit’s Chief Risk Officer Shaun Fernando told CoinDesk.

“As these substantial positions near their expiration, it could lead to captivating shifts in volatility as participants consider rolling over their positions,” Fernando added.

At press time, the ETH-BTC DVOL spread stood at -2.5, having hit a three-year low of -7.8 last week, according to data source Amberdata. Implied volatility, or IV, represents traders’ expectations for price turbulence over a specific period and is positively impacted by the demand for options. A call option represents a bullish bet on the underlying asset, while a put represents a bearish bet.

While rollovers may influence the ETH-BTC DVOL spread, ether’s price is likely to stay around $1,800-$1,900, according to over-the-counter liquidity network Paradigm.

“In terms of ETH dealer gamma heading into expiry, we predict $1,800-$1,900 strikes to be a magnet for spot, predominantly because dealers have largely got long due to previously discussed overwriter flows,” Paradigm said in its market update.

Being long gamma means holding buy (long) positions in options. When market makers are long gamma, they buy low and sell high to keep their overall exposure market neutral. The hedging often ends up keeping prices rangebound.