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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#RealizedVolatility
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.
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➠ #ImpliedVolatility
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.
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➠ #TermStructure
#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…
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☞ More details can be found in this week’s Crypto Options Weekly note to subs ☜
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➠ #Skew
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.
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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.
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➠ #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.
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➠ #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
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➠ #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.
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➠ #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!
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