Crypto Options Insight: Vol Sold As Ranges Stay Intact

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

Realized Volatility & Term Structure

Crypto realized vol was back in the 40s this week as the election debate brought very little drama and no mention of crypto.

Front-end implied vols we down 3-5 vols but this week's expiry 20Sep is holding up due to FOMC on Wednesday.

Carry is extremely positive in ETH at near 20 points and BTC is also healthy above 10. We would expect at least a 5 vol reset lower after the rates decision.

The stair step shape in the term structure remains for the election bucket in 08Nov, implying around a 10% election move. The entire back end of the curve shifted lower in a near parallel fashion.

Skew Term Structure 

• The contango term structure of skew remains intact as short-term caution drives put buying in the front end due to the inability for crypto markets to resume their uptrend despite bullish risk asset price action due to a dovish repricing in rates markets ahead of the FOMC.

• The call premium has continued to fade as investors are not willing to pay as much premium for upside until momentum returns.

• Front end skew puts skew has converged to around 2-4 vols in both assets and inflects into call premium around the election bucket and reaches a terminal call skew of 4 vols in the back end.

Relative Value

ETH vs BTC 

• ETC/BTC spot broke below 0.04 and continues to look very heavy. It looks like it may have potential to test 0.03 at some point and we wouldn't get in the way of it.

• With both assets trapped in ranges we saw the vol spread come in by around 1-2 vols across most of the curve.

• The weekly spread is still around 6 points as FOMC is likely to impact both assets equally whilst traders are willing to pay a bit more premium for ETH vol from October onwards.

• The relative skew term structure is showing a convergence as the curve gets closer to the zero line on both ends. Effectively indicating that the market will be macro led with high correlation.

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