Crypto Options: Pullback in Call Skew As BTC Hits ATH

In this week's recap, Imran Lakha of Options Insight provides the latest insights into BTC and ETH derivatives markets. Explore trends in volatility, option flows, term structures, gamma positioning, and much more to stay informed about the dynamic world of crypto derivatives trading.

This week Imran Lakha walks us through some key points in the crypto options market.

Realized Volatility

• BTC realized vol has settled back a little after the explosive moves of last week. We are still realizing a healthy 82% and broke above the 70k level yesterday. I continue to expect volatility.

• ETH realized vol has remained up in the 90s as it had once again started to outperform and taken out the key 4000 level.

• Implied vols are higher once again and recovered from a mid-week dip last week as spot was flirting with ATH on Bitcoin.

• Carry is flat to negative with high realized vol making it hard for gamma sellers to keep any theta decay.

• US CPI is the big macro data point that could move rates markets and have a feed through to all asset classes. So far crypto has been immune to the rollover in NVDA and chip stocks on Friday, suggesting inflows are still the main story.

Term Structure

BTC

• BTC term structure shifting higher as markets remain volatile.

• March expiries up around 2 vol points.

• The rest of the curve is a better bid with a 5 vol increase on the week.

• Call skew softened by 1-2 vols across the curve.

ETH

• ETH term structure also shifts higher as gamma performs well.

• ETH front-end moves were similar to BTC, up 2-3 points in March expiries.

• Long-dated expiries were firmer by 6-7 vols as expectations for ETH ETF approval get pushed out.

• Call skew got hit hard, as large April call spreads were bought.

Relative Value

ETH/BTC

• ETH/BTC vol spread shifted back higher but a few points as ETH implied vol was better bid than BTC.

• The realized vol spread was back in ETH premium by as much as 8 vols on a 10d realized metric.

• The ETH/BTC spot spread had a nice recovery into Friday, which has since given back some ground as BTC broke above 70k. This spread remains volatile in the short-term and we would wait for a break on the upside before wanting to chase ETH. As the halving draws closer and ETF flows keep coming, we wouldn't rule out BTC leading the charge again.

• We closed out the remaining call switch trades as there appears to be little value or edge in playing this choppy spread right now.

Crypto Option Flows

BTC

Volumes were flat at a whopping $15Bn after making a new record last week. Profit being taken on 28Jun24 85k and 29Mar24 70k calls as spot broke above 70k and IV spiked. Some fresh bullish trades were added in 29Mar 85k calls and April 70k/90k call spreads and June 85k/105k call spreads. You can see in the last 24hrs the cumulative action has been more upside selling of 90k and higher strikes.

ETH

ETH volumes are up around 35% to $8Bn. Taking profit on some March calls, but also fresh buying. Big clips came from April 3600/4600 and 4000/5000 call spreads. Some concerns around the approval of ETH ETFs being less likely given the timing relative to BTC progress led to protection buying in 29Mar 3600 to 3200 strike zone.

Gamma Positioning

BTC

• BTC dealer gamma has remained long to neutral all week as upside gets sold to dealers on profit-taking. Positioning is balanced here but will get longer if BTC continues to rally above 75k.

ETH

• ETH dealer gamma drifting lower as the large 4000 short strike is taking dealers short, and this may accelerate into expiry. ETH has been realizing more than BTC and the gamma setup may explain some if that. Normally dealers have more long gamma on ETH, but this is not the case currently. ETH could continue to be more volatile with this positioning backdrop.

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