Crypto Pops on Macro Tailwinds

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, relative value, and much more to stay informed on crypto derivatives trading.

We are back this week with Imran Lakha walking us through some key points in the crypto options market.

Realized Volatility & Term Structure

Crypto realized vol stable in the 40s and implied vols coming down to meet it.

Most of the vol rest occurred after the FOMC and eroded the positive carry available down to around 5 vols.

Selling BTC gamma has been an easier ride which can be seen from the short candles that got nowhere near the implied bands. ETH, on the other hand, did test the upper limit of the implied range a few times this week.

We have a quiet macro week with only PCE on Friday and some FED speakers mid-week.

China's stimulus efforts may steal the headlines but so far not driving any crypto breakout.

Skew Term Structure 

The contango term structure of skew has become more of a step function this week.

Front-end skew gave up most of its put premium as spot had a bounce and sentiment improved in the crypto space.

The US election remains the inflection point in the curve where we flip from mild put skew into call skew. This suggests that traders still think the election will be a bullish catalyst for crypto.

Relative Value

ETH vs BTC 

• ETH/BTC spot had a decent bounce from oversold levels. Some altcoin speculation has come back after the liquidity environment has improved after FOMC and China actions.

• ETH vol has caught a relative bid, especially in the back end of the curve, but the front end has remained anchored due to vol sellers fading the pop.

• The vol spread now sits at 9-11 across the curve which is in line with the realized spread at 10 vol ETH over.

• The relative skew term structure is fairly flat but ETH upside is favoured the more you look out the curve.

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