Crypto Options Insight: Bullish BTC into the US Election

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

Back again this week with Imran Lakha walking us through some key points in the crypto options market.

Realized Vol

Crypto realized vol drifted lower last week as we couldn't follow through on the explosive rally.

Implied vol was also lower in the front end of BTC but held up better in ETH. Back-end vols generally held their levels well, which is likely to remain the case until after the elections.

Carry back towards neutral.
The OHLC charts show that moves were generally contained within expected ranges apart from ETH which attempted a break higher over the weekend, but alas failed.

Trump's odds have continued to rise, but the impact on crypto prices seems to have paused.

The proof will be in the pudding on 05 Nov.

Skew Term Structure

• Skew term structures shifted a touch higher as the upside continues to be the favored tail despite some hedging activity being seen this week.
• Both curves sit in call skew, but the premium is nowhere near highs as there was no confirmation of the break this week.
• With $2Bn ETF inflows into BTC ETFs, there may be some last-minute hedging demand before the event with puts trading for no excess premium.

Relative Value (ETH vs BTC)

• ETH/BTC spot had a little bounce off the lows but has already given half of it back.
• ETH vol held up better than BTC vol this week, taking the vol spread back above 6 points across the curve.
• Our covering of ETH shorts has proved timely and we see little edge in trading the spread at these levels.
• The relative skew term structure remains unchanged and shows a slight put premium in the front expiries vs a call premium in the long end post Mar 25.

Market Outlook 

In the current market, realized volatility (vol) in Bitcoin has been declining, with the front-end vol experiencing the most pressure. Ethereum held up slightly better but showed choppy behavior, testing implied volatility ranges. Implied volatility, especially in Bitcoin, has seen a reduction, particularly in the front end, while the back end remains relatively stable. Skew dynamics indicate a recovery from last week’s deeper put skew, particularly in Ethereum. The term structure shows a steep increase in volatility premium, suggesting potential for future upside in both Bitcoin and Ethereum, with Ethereum expected to catch up longer-term.

The election in November could act as a trigger for heightened market movements, particularly in Bitcoin, which has shown more volatility sensitivity in the near term.