October 4, 2023
Weekly Mid-week Crypto Derivatives Market Recap where Imran Lakha of Options Insight gives brief yet concise breakdowns of BTC's & ETH's Volatility, Term-Structure, Relative Value, Skew, Crypto Option Flows, and Gamma positioning.
This week Imran Lakha walks us through some key points in the crypto options market.
Realized Volatility
- Crypto markets came out of the gates strong as the month of October is known for being a positive one for BTC. Realized vol was up 5 points in BTC and around 10 points in ETH as the initial excitement around a futures ETF got things moving again. Implied vols also bounced from their lows last Friday, particularly in the weekly options as gamma started to work, especially in ETH.
Term Structure
BTC
- BTC term structure shifting slightly lower from 1-month and longer. • Weekly expiry was up 2 vols as gamma was favored, with the larger recent price swings.
ETH
- ETH term structure seeing a better bid for weekly gamma which was up 5 vols.
Sep-Dec23 was down small as that remains the main supply zone on the curve.
Skew
BTC
- Once again, skew remains very spot sensitive, and the 4% rally to start the month has flipped skew back towards call premium across most of the BC curve. Weekly expiry still has a slight put premium of around 1 vol, but then we see a steady increase into call premium with the back end reaching as high as 5.5 vols
ETH
- ETH skew has had a big shift, as the persistent put premium in the middle of the curve has now gone and we see call premium from 60d and longer maturities. Front end weekly skew still remains in 2.5 vol put premium, but then, similar to BTC, we move towards calls as we go further out the curve. The back end, even for ETH, is in 4 vol call premium, and we suspect this will be more stable now that a more bullish longer-term outlook is forming for ETH around ETFs
Option Flows
BTC
- Volumes are up 30% on BTC options as the large quarterly expiry rolled off. Usual on-screen 1-month call selling flows and in block trade we saw the rolling of October calls into November calls. Downside in Nov23 and Dec23 was better for sale versus buyers of Oct23 puts and Mar24 15k puts.
ETH
- ETH options volumes were up 60% as ETF optimism triggered call activity. Lots of two-way flows with initial buying in Oct-Dec23 calls across 1800-200 strike calls. After vol spiked, call sellers came in, on Nov 1800 and Dec 1900 calls in 18k clips that knocked the vol back down.
Gamma Positioning
BTC
- BTC dealer gamma positioning has come back to near flat after the large expiry rolled off on Friday. As positions start to rebuild into year-end this will likely change, but for now, dealers own local strikes at 28-29k vs. being short upside above 30k.
ETH
- ETH dealer gamma collapsed after expiry and dealers are long 27Oct 1700 strike versus other shorts in shorter expiries. The ETF spike led to some short covering from clients which has taken dealers' books more neutral.
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