June 20, 2024

Crypto Options: Selling Pressure Continues

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

BTC realized vol has remained in the mid-30s, but ETH has popped toward 50 as spot broke down again.

Implied vols were flat to slightly softer, which kept carry positive in both names.

We are light on data this week and have the Juneteenth holiday, so would expect ranges to hold and short gamma to continue working.

The ETH ETF launch speculation for 2nd July is not supporting prices as traders expect less inflows due to a lack of staking yield.

Mixed messages on the macro as we see disinflationary data, but a higher for longer message from FOMC scaled back the optimism in crypto assets.

Powell hinted that the labor market (NFP data) may be overstated and so we still think they are itching to cut rates. Buy the dip!

Term Structure

BTC

BTC term structure shifting lower in a near parallel fashion.
We saw a 2-4 vol drop out to Sep24 and then around 1 vol point in longer maturities.
Call skew continues to fade out to Aug24 as spot drifted lower.
Long-dated calls still hold their premium.

ETH

ETH term structure steepening.
Short-end vol down 5-8 vols.
July-Sep24 around 1 vol lower but Dec24-Mar25 catching a small bid.
ETH call skew still holding up better than BTC across the curve as ETF launch anticipated in early July.

Relative Value

ETH & BTC

ETH/BTC vol spread slightly higher from 1-month and longer maturities as BTC vols dropped harder. Weekly ETH was under more pressure relatively.
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 the support zone again, as ALTs come under pressure. This week, a break lower may provide a great entry for the call switch trades we have previously talked about. Using the long-term options makes more sense given the cheaper vol spread.

Skew

ETH & BTC

Skew has been drifting lower for calls as spot price actions have been uninspiring and people have already piled into their bullish trades for the ETF launch.
BTC call skew has faded a little more than ETH, which still holds a higher call premium for 1-month and longer.
Weekly skew shows a touch more hedging demand in ETH, as technical have been weaker there, despite the better newsflow.
Overall, no change in setup and message from the options market. Near-term caution, but the rally is coming at some point later this year. That picture may change if 3300 gets taken out on the downside, but for now, we are believers!