October 11, 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
- BTC realized vol was stable on the week remaining around 32% whilst ETH continues to have wilder swings and realized as much as 40.5% (which equates to a greater than 2% per day move on average
- Implied vols had their customary sell-off into the weekend but have since recovered to near flat on the week
- BTC implied vol has converged with realized, leaving carry at neutral, but ETH carry is deeply negative (-10 vols) as over-supplied gamma has been working well for those willing to trade it and pay the decay.
Term Structure
BTC
- BTC term structure continues to come under pressure from the middle of the curve. Oct23 expiries managed to stay green on the week, but Nov23-Mar24 saw the selling flows and was down 2-3 vols.
ETH
- ETH term structure has a similar picture to BTC. The VEGA part of the curve from Nov23 onwards shifted lower with even the longest maturity Sep23 down 1 vol.
Skew
BTC
- After another failed attempt to break above 28500, BTC skew has moved back to put premium across all the maturities out to 3-month. The long-end skew still remains firmly for calls, as has been persistent for many months now.
ETH
- The call bid that we saw in ETH skew last week couldn't hold and puts came back with a vengeance this week (as call sellers came back). The curve out to 3-month is deeply in put premium, with 1-month the extreme at 7 vols. The long end has also compressed but still holds a small call premium, but much less than BTC.
Option Flows
BTC
- Volumes down 15% on BTC options as spot remains rangebound. Large overwriter rolled Oct23 29k short calls into Dec23 30k. Dec23 21k puts sold (delta hedged) and 31k/37k call spreads bought outright. Dec23 23k/27k/31k call fly bought. Put spreads active in Oct23 expiries.
ETH
- ETH options volumes down considerably (30%) as no follow through on the upside momentum. Biggest clips came from Nov23 1700 & 1750 call overwriter in 60k options. Some Oct23/Nov23 call calendars bought, Dec23 1700 calls sold vs higher strike bought. Oct23 1600 putsbought otherwise Nov23 and Dec23 puts generally sold to fund upside.
Gamma Positioning
BTC
- BTC dealer gamma positioning has been drifting back down and shows a clear bias to the upside. If spot rallies above 30k, then the short position almost doubles. That is not including any fresh calls buying that is induced by such a move
ETH
- ETH dealer gamma behaving opposite to BTC and grinding higher. Spot below 1600 keeps net gamma more neutral but a pop towards 1700 and above will flip positioning very positive due to the large 1700 Oct23 long strike that dealers own. Same setup we have seen most of this year, ETH has more resistance in a rally than BTC.
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