September 27, 2023
Weekly Mid-week Crypto Derivatives Market Recap where Imran Lakha of Options Insight gives brief yet concise breakdowns of BTC's & ETH's Volatility, Term-Structure, Relative Value, Skew, Crypto Option Flows, and Gamma positioning.
This week Imran Lakha walks us through some key points in the crypto options market.
Realized and Implied Volatility
- Crypto realized volatility faded back into the mid-20s as the spot drifted back lower over the course of the week, unable to hold onto gains.
- Implied vols were lower, but to a lesser extent than realized, taking volatility carry back to positive territory and rewarding the gamma sellers, who have been having a good year
Term Structure
BTC
- BTC term structure steepening as front-end drifts lower pulled down by low realized vol.
Sept - Nov23 vol was lower by 2-3 points. Long end maturities in 2024 were unchanged as VEGA demand remains
ETH
- ETH term structure also steepening with front end moving lower. Sept-Oct23 down 1-2 vol points, but Nov23 was worst hit down 2.5 vols
Skew
BTC
- Volatility of skew remains high, as the failure to build any upside momentum has brought put demand back and taken skew into put premium in the short-dated part of the BTC curve. 1-week skew is as high as 4 vols for puts, 1-month is 1 vol and beyond that, we start to see call premium come back, with the 6-month still at 4.5 vols for calls.
ETH
- ETH skew looks similar in the 1-week options at around 5 vol put premium, but the rest of the curve is also more persistent in puts with 30-90 day maturities in a 3-4 vol put premium still. The far long-end 6-month plus has a 1-2 vol call premium.
Option Flows
BTC
- Volumes are slightly up this week again this week as we approach a large quarterly expiry on Friday. Lots of rolling of exposures, big clips were 29 Sept 24k puts rolled into 13 Oct. Oct 30k and 32k calls rolled into Nov 33k calls.
ETH
- ETH options volumes up in line with BC. 270ct 1900 call bought in size as a closeout, but was counteracted by huge on-screen selling of Oct 1600 and 1700 calls. Nov 1800 calls also sold in a block. Put protection bought in 29 Sept 1550 puts.
Gamma Positioning
BTC
- BTC dealer gamma moved back up to neutral as the 29Sep 27k strike looks to be dominating dealer's books. A move to the downside would flip them marginally negative based on Friday's options.
ETH
- ETH dealer gamma has normalized back down as spit traded lower away from 1700 and put buyers came in for 1550 puts in 29 Sept. This leaves the positioning less long going into Friday and so a pinning scenario at 1700 is looking much less likely. If ETH breaks lower, we see positioning could even flip short which may help fuel a bigger move.
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