Crypto Volatility Trading and Bootstrapping the Meme Surface

On Thursday, December 5th, Greg Magadini, CFA (Director of Derivatives at Amberdata), Euan Sinclair (Portfolio Manager at Hull Tactical Management), Samneet Chepal, CFA (Crypto Quantitative Researcher) and Kelly (Head of Institutional Partnerships at Derive) joined CoinDesk moderator Andy Baehr, CFA to explore altcoin options trading.

Webinar Overview

A core problem with any new market is that if there are not already options trading, then how do you figure out what the value of the options market is? Where should the value be trading?

While this can be a guessing game, Amberdata has created a reliable method. During the webinar, the panel discussed alternate methods and the pros and cons of each. As the first venue to trade using this framework, Derive discussed how they have integrated Amberdata’s approach into their trading and the benefits they have seen. The panelists discuss how this framework could be applied to other markets such as index options.

The webinar explored innovative methods for pricing options in nascent crypto markets, particularly altcoins and memecoins, where options markets are still developing. Amberdata’s methodology involves referencing equity markets with liquid options as a basis for generating implied volatility surfaces, leveraging behavioral similarities between equity and crypto traders. This non-parametric approach co-integrates crypto price movements with analogous equities to derive robust volatility estimates, which are then adjusted for historical and future projections. Panelists highlighted the scalability and reliability of this approach, which has been tested successfully with assets like Bitcoin and Ethereum.

Key takeaways included the potential for expanding options markets, handling short- and long-term maturities, and how Amberdata’s solution bridges existing gaps, providing a scalable model for industry players like Derive.

A recording of the full discussion is available here.

Methodology

This was truly an interesting session leveraging the entire team’s deep digital asset and options trading backgrounds.

Learn More

A recording of the full discussion is available here.

Download the methodology here.