July 24, 2023
USA Week Ahead:
- Wednesday 2:00p - FOMC
- Wednesday 2:30p - FOMC Press Conference
- Thursday 8:30a - GDP
- Friday 8:30a - PCE
Disclaimer: Nothing here is trading advice or solicitation. This is for educational purposes only.
Math minded people here, pardon any typos.
MACRO THEMES:
Last week was a quiet week in terms of macro economic releases. BTC consolidated with a tight spot range.
This week we have FOMC on Wednesday, GDP on Thursday and PCE on Friday.
These are big reasons for implied to carry some premium, but the trend as of late is for US macro data to be in-line and stable.
Many officials signaled in recent speeches and interviews that they support a quarter-percentage-point increase.
Traders will be on the lookout for forward guidance during the FOMC press conference. Inflation data has been coming down and the soft landing narrative is gaining steam.
Outside of a surprise, which would promise more hikes in the forward guidance, realized volatility is likely going to be muted as the FOMC acts predictably.
The VIX is responding accordingly, hitting a low of 12.73 last week.
I’d expect BTC’s lower volatility trend to continue as well, in the near term. Especially given that spot prices are working through a major $30k price level too.
BTC: $29,954 (-0.9% / 7-day)
ETH :$1,881 (-2.1% / 7-day)
(BTC Term Structure - YTD BoxPlots)
Currently, the BTC term structure is near YTD lows.
The richness chart also shows that the term structure has steepened a lot recently.
(Although the term structure could steepen even more, short-vol traders don’t need it to.
Merely holding this structure allows vol sellers to collect theta and IV “roll down” as, say, a 60-DTE option (40% IV) becomes 7-DTE (34% IV).
As we showed in our most recent quarterly report, historically speaking, short-vol structures have generally been profitable.
(Short-Straddle strategy, PNL in BTC)
Although 7-DTE ATM IV of 34% seems historically low, the current 7-day RV of (24%) makes IV “relatively” expensive at current levels.
We can see the 7-DTE VRP now back to large levels.
As we wait for spot-ETF news, other regulatory developments, and continue to avoid any macro economic data surprises, we have good reason to start favoring short-vol structures, once again.
PROPRIETARY “GVOL-DIRECTION” FLOWS - @Gravity5ucks
The top trades of the week, ordered by the paid/received premium, show a prevalence of net buying. Long call spreads Dec $34k/$45k, long $35k August, and long $40k December are the most significant block trades, while on-screen, we notice a "presumed" buyback of short $28k call options and a long $31k call option in July. There are also some protective flows with $30k puts.
(BTC Options Scanner and Heatmap)
On Ethereum, we notice the same theme of Bitcoin with the block trades, with a prevalence of bullish flow: long $2.3k Mar24, long risk reversal -$1.5k/+$2.1k.
On-screen, however, the selling of near-at-the-money calls $1.95/2.0k dominates.
(ETH Options Scanner and Heatmap)
Paradigm Block Insights
Bullish flows early in the week in BTC options; traders bought fresh upside and rolled their upside positions out. Spot chops through range as summer lull kicks in.
BTC -1% / NDX -1.25% / ETH -2%
🌊BTC
Notable follow-thru interest in longer dated tenors from weeks past:
840x 29-Dec-23 34000/45000 Call Spread bought.
Remember the Dec flows in the past 6 weeks, 180d 25d skew below.
5k 29-Dec-23 40000 Call bot.
2200x 29-Dec-23 35000/45000 CSpd bot.
🌊BTC cont.
Pretty clear that Paradigm block volumes are highly correlated to spot's position in its local range (29.8k - 31.5k). With spot <30k — but not confirming a break lower, requiring book repositioning — apathy has once again taken over.
BTC 1M ATM vols approaching 35v, but with VIX ~13, not like BTC vols look low on a relative basis...everything is low. BTC 7d realized ~24.4v, vol sellers win again.
🌊ETH
Mixed ETH flows on Paradigm, continuation of Deribit-Direct Mar vega buying blocks printed. Total flows noted below. We discuss these flows on the new TBP coming tomorrow 🙏.
6k 29-Dec-23 1600/2400 Strangle bought.
5k 25-Aug-23 1900/2200 Call Spread sold.
4k 29-Sep-23 2200 Call bought.
We dive into China in the most recent Macro Pulse!
Check it out 👇
🎉 Another successful @ThetanutsFi complete on @tradeparadigm 💪
Thx to bidders, congrats to the winners 🥳
Winners 🏆
🥇 @Darley_Tech
🥇 @DWFLabs
🥇@BastionTrading
🥇 Anon 🤫
Come join us next Friday frens 🫡
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BTC
ETH
Lyra Weekly Review
Arbitrum:
Optimism:
Volatility
Current ATM IV is ~33% in ETH, back on its lows while ETH prices settle back in the dead zone.
Trading
Traders are shorting at the money options and compressing vol, betting that ETH remains range bound for now. Lyra has seen a proposal for launching XRP options on Optimism; if approved, XRP markets will be deployed soon.
ETH Market-Making Vault
ETH Arbitrum: +3.72% since inception, +7.5% annualized
ETH Optimism:
Depositors earn an additional 9.57% rewards APY, boosted up to 41.05% for LYRA Stakers by depositing USDC to Lyra’s Market Making Vaults.
Net MMV Exposure:
ETH vaults on both Arbitrum and Optimism are a large amount of at-the-money options and short a small amount of wing options. The majority of open interest lies in calls, Arbitrum call OI being ~73%. Vaults need a move in underlying or will be bleeding theta over the next week.
ETH Arbitrum:
ETH Optimism:
BTC Volatility
BTC IV has settled ~37%, remaining slightly firmer than ETH.
Net BTC MMV Exposure:
BTC vaults also remain long gamma, short theta
Learn more about Lyra in this GVOL explainer video!
Trade: app.lyra.finance
Twitter: https://twitter.com/lyrafinance
Discord://discord.gg/Lyra
Watch @itseneff and @GenesisVol talk options here
AMBERDATA DISCLAIMER: The information provided in this research is for educational purposes only and is not investment or financial advice. Please do your own research before making any investment decisions. None of the information in this report constitutes, or should be relied on as a suggestion, offer, or other solicitation to engage in, or refrain from engaging, in any purchase, sale, or any other investment-related activity. Cryptocurrency investments are volatile and high risk in nature. Don't invest more than what you can afford to lose.
