October 18, 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
- All was quiet on the crypto front for most of last week, with BTC 10d realized grinding down to 25%, until yesterday when we saw a massive 10% pop in a matter of minutes due to the fake ETF approval headline posted on Coin Telegraph's social media. The report was denied, and prices came tumbling back down just as quickly. This spike has taken realized vol up into the 40s again. ETH was less impacted with realized around 35.
- Implied vols have also moved up to track the spike in realized but are off their highs already as mean reversion kicks in and profits get taken on long call positions
Term Structure
BTC
- BTC term structure caught a bid, particularly in the front end as prices exploded higher on fake news.
- Gamma buckets in Oct23 were naturally the most bid up 4 vols.
ETH
- ETH term structure also shifting higher, but to a lesser extent.
- Front-end vols were dragged higher along with BTC, but with less realized vol, the Gamma was not as appealing OCT23 up around 3 vols.
Skew
BTC
- Skew on the move once again, as the sharp rally gets the BTC call wing excited. We see the whole BTC skew term structure back into call premium, with 2 vols on the front end and up to around 8 vols in the far long-end expiry (Sept24).
ETH
- ETH skew has also turned back towards calls, but not as sharply. We see front end weeklies with a small call premium, then the 1-3m is around 2 vols for puts, and then we head back into call premium for the longer end where the far end of the curve in Sept24 has a similar call skew to BTC at 7 vols.
Option Flows
BTC
- Volumes down around 10% on the week. A large on-screen bid for 10d Dec23 calls (36k strike) helped pump up implied vols and attracted buyers of Dec23 32k/37k call spreads and sellers of Nov23/Dec23 36k call calendars. We also saw put spread buying in Oct23 after the pump higher.
ETH
- ETH options volumes up 40% this week as we saw two-way flow on calls. A bid for Dec23 2000 calls helped pump the vols on the call wing. Usual selling floes in Dec231700 calls, but also buying of Oct23/Nov23 call calendar. On the downside, 1400 puts were sold across the curve from Nov23-Mar24, either outright or as part of bullish risk reversals.
Gamma Positioning
BTC
- BTC dealer gamma positioning has been flat this week, but briefly spiked lower as BTC broke 30k pn the fake news. Around these levels, positioning is more balanced but gets short above 30k
ETH
- ETH dealer gamma starting to normalize lower as some Oct23 short strikes come onto dealer's books. If crypto markets break higher and we move away from the large Nov23 1650 and 1700 strikes, then ETH gamma positioning will be cleaner and spot ETH may be able to participate more in the rally
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