Ready for another vol dive into the exciting world of #crypto to discover new opportunities?
Wondering how big players are positioned for hedging or generating alpha?
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As BTC 25k resistance was rejected and crypto sold off, implied vols got hit.
Anticipating that realised would fall as we stayed in the 22-25k range.
Sure enough, realised vol has collapsed by 20p in BTC and ~10p in ETH.
Taking volatility carry back to positive.
The implied vol collapse was accelerated by the dumping of calls that hadn’t worked out but still had some premium left.
Systematic vol selling after expiry/into the weekend did the rest.
PCE inflation data took down stocks on Friday, and crypto markets could not ignore the macro.
With carry back to median levels, short-dated implied vol looks fair to slightly cheap.
But a catalyst is needed to break the range.
#BTC term structure fell back into contango as the front end got hit hard last week.
#ETH curve trading in line with BTC, with a steep contango.
This is slightly surprising, given #Shanghai upgrade due in March.
ETH/BTC vol spread trading in 5-6 vol range across maturities as 10d realised spread remains flat.
The long-term chart of the vol spread suggests this is a great entry…
☞ More details can be found in this week’s Crypto Options Weekly note to subs ☜
Skew normalising back towards flat as upside momentum was lost.
BTC had been driving the call premium led by front-end expires.
But has now faded back down to slightly in favor of call across all maturities.
ETH skew also converging back towards neutral.
This bid for #Calls in long-term BTC makes structural hedging using risk reversals look appealing.
Especially for crypto players w/large treasuries to manage.
We expect this flow will increase if BTC gets to ≈28k.
On the other hand, the persistent ETH put skew is a potential selling opportunity…
IF you are underweight ETH and looking to add exposure.
➠ #BTCoptions Flows
Volumes dropped off as 25k resistance failed & 24Feb expiry rolled off.
Some good two-way flows in 3Mar and 31Mar upside in 25-27K strike zone as calls that didn’t work changed hands.
Put protection buying also came back with 24k-19k strikes trading in 3Mar and 31Mar
30Jun saw straddle sellers on the 24k and 27k strike.
Big outright buyers of 45k calls.
➠ #ETHoptions Flows
Still very call dominated.
Some two-way on puts with buyers of 3Mar 1600 and 30Jun 1000 puts.
But a 10k clip of 26May 1500 #Puts sold.
Upside bought in many forms.
Notable clips were 10Mar 1700 calls, and 30Jun 1600/2100 call spreads.
Big convexity trade in 30Jun as seller of 2500/3500 cal ratio 1 by 3
➠ #Bitcoin #Gamma Positioning
BTC dealer gamma still short.
But less extreme as spot retraced lower, and upside got sold back.
Dealers that are still short the 31Mar 26-28k zone have longs in front of it.
So we see little #squeeze potential.
➠ #Ethereum #Gamma Positioning
ETH positioning more long vol.
31Mar strikes look scattered from 1600-1900.
We may see this flip if an upside move starts and call demand comes in.
Taking dealers short.
➠ That’s a wrap on this week’s Crypto Roundup!
If you want more details, go watch this week’s Crypto Insight video on the Options Insight YouTube Channel!
(link in follow-up tweet)
➠ If you enjoyed this Crypto Roundup, let me know your thoughts or questions in the replies!
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Cheers!Trade Idea Tue. | Part 2 𝞂