June 6, 2023
USA Week Ahead:
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Tuesday 9:00a ET- S&P Case-Shiller home price index.
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Wednesday 9:30a ET- Fed Chair Powell speaks.
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Friday 8:30a ET - PCE.
Disclaimer: Nothing here is trading advice or solicitation.
This is for educational purposes only.
Math minded people here, pardon any typos.
MACRO THEMES:
We’ve seen a ton of crypto specific news last week that led to a massive rally in BTC and other coins.
After the BlackRock spot ETF application, Citadel + Schwab + Fidelity announced a new exchange “EDX”.
“EDX” functions like traditional exchanges by separating custody and brokerage services away from the exchange, and enabling “EDX” to be focused exclusively on order matching exchange services.
Combine this news with Jerome Powell’s “Crypto is here to stay” comment and we see strong fundamentals to help explain the rally last week.
Equity vol continued to drop lower last week, while the USD rallied against gold and other currency pairs.
This week we will get another inflation barometer: the PCE price index on Friday.
BTC: $30,467 (+15.3% / 7-day)
ETH :$1,898 (+10.1% / 7-day)
SOL: $16.96 (+9.9% / 7-day)
This past week displayed the explosive potential of upside volatility in BTC, we haven’t seen in a long time.
The term structure shifted higher across expirations as BTC broke $30k and dealers found themselves in negative gamma territory.
We can see that the size of the back-to-back rally days were about 2+ STD vs the 7-day ATM option implied daily move.
This quickly gave us “Backwardation”, followed by calm that brought some chunky weekend vol selling - which was noted in Tony’s Deribit Insight post.
The large on-screen Deribit buyer of AUG-34K-CALLS seems to have sold out a lot of their position.
Having purchased the options for about ~$600 (44-50% IV), they now sold out (40-48%) IV for ~$1,100.
ETH volatility has strictly fallen below BTC IV.
Although I continue to see a world where downside price action could flip IV profiles - as ETH loses more than BTC - the current sentiment favors higher prices and higher BTC vol.
June’s quarterly expiration is going to be a big one on Deribit and currently poses the greatest short-gamma profile for dealers.
PROPRIETARY “GVOL-DIRECTION” FLOWS - @Gravity5ucks
The news of BlackRock and others filing spot ETF has not only boosted the spot market but also resurrected options activity, which had been in a state of apathy for over two months.
The difference between notional BTC and ETH is at historical highs.
With the break of $30k, the options flow still appeared constructive.
Rational profit-taking on near-term expirations and a significant portion of new call positions opened or rolled over. The heat map clearly highlights the activity, with purchases in the $31k-$34k range and short positions in the $35k-$36k range (many of which will expire with the upcoming Friday quarterly expiry)
(BTC Options Scanner)
This flow is heavily impacting dealers’ positioning, and ahead of Friday's expiration, we expect a historic record (since we started tracking) of negative gamma. With only a little spot move, we could witness fireworks!
*This chart depicts the overall impact of GVOL GEX in terms of $Mil notional in the underlying for a 1% move in spot prices (static gamma).
Paradigm Block Insights
What. A. Week. BTC rallied 16%, ETH +10%, while NDX lost 1.3%.
Feels like the market has reverted to its Q1 spot up / vol up regime in a big way.
Aggressive taker flows to the topside persisted all week, and strong volumes returned to the options market!
The flows this week were all about BTC, driven by the BlackRock and EDX news.
The Buyside / HNW crowd couldn’t buy calls enough as BTC approached 30k, on Tuesday.
1.1k Dec 40k Call bot.
1.1k Jun 27k Call bot.
1k Aug 36k Call bot (tied).
We are seeing some natural upside taker interest bounce back into the game for the first time since Q1, with BTC much more in focus than ETH. ETH implieds trading ~8v under BTC in most tenors (chart 1), and BTC 25d skew normalized for ATMs sits at the most extreme levels YTD (chart 2).
Spot filled the gap up to 30k on Wednesday and takers continued chasing the move through the end of the week.
1200x 30-Jun-23 30000 Call bought.
1000x 30-Jun-23 32000/35000 1x1.5 CSpd bought.
500x 28-Jul-23 28000 / 32000 (tied) Bull Risk Reversal bought.
ETH
ETH lived in BTC’s shadow this week, reflecting in the ETH/BTC languishing price action. Flows were similar, with two-way interest for vol.
13000x 28-Jul-23 1900 Call bought.
13000x 30-Jun-23 2000 / 7-Jul-23 2050 Call Calendar bought.
6889x 30-Jun-23 1900 Straddle sold.
6350x 30-Jun-23 2000 Call bought.
The newest #TBP just dropped with @KaikoData. 🚀
In this episode, we talk about...
💎 @blackrock iShares ETF💎
@KaikoData OB liquidity research💎
@davidbrickell80's bull thesis
What a time to be alive! 👇
🎀 Another @ribbonfinance auction on @tradeparadigm complete 🎉
Average beats to screen of 10% to spice 🌶 those vault yields 🔥🔥
🏆Congrats to the week’s winners🥳
🥇@QCPCapital
🥇 @OrBit_Markets
🥇Various ANON 🤫
Same time next week, friends!🫡
Hit us up on Telegram! 🙏
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BTC
ETH
The Squeethcosystem Report
Fireworks flew early to start the week and ETH price didn’t look back. ETH ended the week +9.98%, oSQTH ended the week +20.16%.
Volatility
oSQTH IV saw declines throughout the week.
oSQTH IV vs. reference vol spread was quite active this week, trading cheap to its reference. For those interested in the spread check out: Squeeth Relative Value Trading
Volume
The 7-day total volume for oSQTH via Uniswap oSQTH/ETH pool was $645.53k.
June 19th saw the most volume, with a daily total of $205.34k traded.
Crab Strategy
Crab strategy ended the week +0.76% in USDC terms.
OPYN Twitter: https://twitter.com/opyn
OPYN Discord: discord.gg/opyn
Lyra Weekly Review
Arbitrum:
Optimism:
Volatility
Current ATM IV is ~45% in ETH, a near 10-point jump off last week's lows. Calls are trading at a slight premium after an explosive rally.
Trading
Lyra Vaults briefly reached 100% utilization on Arbitrum this week as demand for Lyra options exceeded the liquidity available.
Lyra Markets have seen lots of upside interest with 64% of the OI being held in calls.
Markets also reached yet another ATH in OI this week!
ETH Market-Making Vault
ETH Arbitrum: +3.53% since inception, +8.41% annualized
ETH Optimism:
Depositors earn an additional 8% rewards APY, boosted up to 25.4% for LYRA Stakers by depositing USDC to Lyra’s Market Making Vaults.
Net MMV Exposure:
ETH vaults on Arbitrum are short vol, while Optimism vaults are mainly balanced. Both vaults are short downside and long upside, near ATM options.
ETH Arbitrum:
ETH Optimism:
BTC Volatility
Both IV and RV have spiked in the last week, IV is off its highs but remains elevated
Net BTC MMV Exposure:
BTC vaults remain long gamma
Learn more about Lyra in this GVOL explainer video!
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Watch @itseneff and @GenesisVol talk options here
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