Crypto Options: Low Vol Calm Disrupted

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.

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

Realized Volatility

Realized vol continued to drift lower last week, hitting lows of 30% in BTC and 35% in ETH.

Implied vols were softer by a few points but appear to be holding up due to CPI and FOMC due this week

Carry is still deeply positive for both names, but the break lower overnight in ETH could change that if 3500 doesn't hold.

We don't think "delays" in the ETH ETF launch are enough to derail the whole rally and would expect dips to get bought.

The pop in yields after NFP made it difficult for BTC to go higher and we had the first day of spot ETF outflows in nearly 3 weeks yesterday.

Term Structure

BTC

• Similar moves to last week as gamma holding up better, but VEGA slightly offered

• The overnight drop has seen a bid come back for this week's options.

• Longer-dated volatility drifts as call buying dries up.

• Call skew fading in the front end but holding steady in the back.

ETH

• ETH term structure moving almost identically to BTC.

• Weekly vol popped by 7 points on the latest drop in spot.

• The rest of the curve from July was lower by 1-2 vols.

• ETH call skew in the front end hammered back down to near flat but the long end is still firmer.

Relative Value

ETH & BTC

• ETH/BTC vol spread slightly higher in the front end as ETH drop was more violent but lower in the back end on the prospect of ETF launch delays.

• The ETH vol still holds a significant premium across the curve and we don't see this changing until the ETFs are finally launched and inflows materialize.

• The ETH/BTC spot spread drifting into support zone and may be providing a nice entry for those who didn't manage to catch the move from the sudden SEC pivot.

Skew

ETH & BTC

• Skew has been uneventful for most of the week as the medium-term narrative is unchanged.

• The overnight drop in crypto has led to some puts buying in the front end and taken call skew to near flat for the weekly expiry.

• Therefore, skew term structures are quite steeply upward sloping again with minimal call skew in the front and then stretching to 5-7 vols in the long end.

• Long-end ETH calls holding the bigger premium over BTC despite short-term jitters on the break below 3700 overnight.

• Until the call skew flips back in favor of BTC, the options market is telling us to stay long ETH for later this year.

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