Crypto Options Analytics, April 3rd, 2022
Crypto Options Analytics, April 3rd, 2022
Author: Greg Magadini
Visit gvol.io
Disclaimer: Nothing here is trading advice or solicitation. This is for educational purposes only.
Math minded people here, pardon any typos.
Feel free to contact us at https://t.me/tradeparadigm & follow us at @tradeparadigm on Twitter to access the best pricing and liquidity for large trades in crypto derivatives.
$46,409
DVOL: Deribit’s volatility index
(1 month, hourly)
Monday started with a nice push higher to $48k after a breakout above $45k. The rally was sharp.
That said, implied and realized volatility continued lower, despite the trend higher in prices.
This is because the months before, BTC traded a $45k to $37k range ($8k / ~20%) 5x in the 60-day period between mid-Jan to mid-March.
As BTC prices trade between $45k and $48k this week, the overall range is consolidated, allowing vols. to drop.
TERM STRUCTURE
(April 3rd, 2022 - BTC’s Term Structure - Deribit)
Week-over-week, the term structure has steepened as short-term vol. dipped about 10pts.
Long-term vols. haven’t moved.
Short-dated vol. and medium-term vol. are a good sell (capturing term structure “roll”), if spot prices respect $40k-$50k range. Prices could consolidate within these levels for weeks, as $50k is a rather psychological level.
Long-term vol. continues to be an interesting buy. Spot prices are bullish and a real bull-run will likely bring higher RV.
SKEWS
(April 3rd, 2022 - Short-term and Medium-term BTC Skews - Deribit)
Long-term option skew has finally rallied to par. That said, par is still an interesting buy level for OTM ∆25 calls.
Short-term skews resumed negative levels.
The market is viewing higher spot prices as a trigger for lower volatility. This has proven true in the past couple weeks.
Short-term and medium-term skew is fairly priced from a vol. perspective but is also providing a good entry for those willing to hold long-delta risk.
(April 3rd, 2022 - Long-Dated BTC Skews - Deribit)
Open Interest - @fb_gravitysucks
BTC
The first weekly of the month was characterized by the initial rise in spot, which saw the flow with a bias towards calls.
The open interest profile shows where the action was most concentrated: protection at the $40k support and upside exposure in the $42k-$50k spread.
Unfortunately for call buyers, the settlement price has returned to almost the same level as a week ago.
(Apr 1st, 2022 - BTC Notional - Deribit)
BIG TRADES IN THE FLOW
The weekly flow saw the dynamism we expected after the monthly close in March; however, the trades were rather “light".
(Mar 28th - Apr 3rd, 2022 - Options scanner BTC - Deribit)
The week can be summarized in two major themes, one tactical and one strategic.
With the former, we essentially saw a constant flow of exposure with call spreads -some calendarized- in April, with strikes $52k-$60k.
The closing of about 30% of the open interest of $60k 29APR should be noted, even if difficult to interpret (e.g. MMs unloading inventory or a large player that closed a previous position).
The second, on the other hand, is the accumulation of upside exposure in the back-end maturities in the strikes $70k-$80k-$90k - certainly incentivized by the low IV - and which caused the long term skew to go into positive territory.
For more insights, follow veteran crypto options trader Fabio on twitter @fb_gravitysucks
VOLUME
(April 3rd, 2022 - BTC Premium Traded - Deribit)
(April 3rd, 2022 - BTC’s Contracts Traded - Deribit)
Paradigm Block Insights (21 Mar - 27 Mar)
(28 Mar - 3 Apr - Volume Profile - Deribit & Paradigm)
Feel free to contact us at https://t.me/tradeparadigm & follow us at @tradeparadigm on Twitter to access the best pricing and liquidity for large trades in crypto derivatives.
VOLATILITY CONE
(April 3rd, 2022 - BTC’s Volatility Cone)
Realized volatility is completely gassed out across the board.
The spot price levels of $42.5k-$50k will also provide clear consolidation boundaries for sustained lower RV.
Diagonals remain interesting here, to finance long-term call buys.
REALIZED & IMPLIED
(April 3rd - BTC’s 10-day Realized-, and Trade-Weighted-, Implied-Vol.-Deribit)
The RV/IV gap between 10-day RV and ~15-day IV has good juice to be squeezed.
Assuming price remain within our $42.5k-$50k range, RV is unlikely to pick up…meaning there’s nearly 15pts-20pts of vol. premium here.
Something like -$50k 4/29 C (+$1500) against +65k 9/30 (-$3600) (give or take)
$3,500
DVOL: Deribit’s volatility index
(1 month, hourly)
TERM STRUCTURE
(April 3rd, 2022 - ETH’s Term Structure - Deribit)
ETH vol. is down in the dumps.
ETH Dvol index (VS) BTC Dvol index in only 10-pts apart.
This means that BTC/ETH relative volatility trades could become interesting here.
The term structure is in a rather steep Contango. Nearly 25-points between the front and back maturities.
SKEWS
(April 3rd, 2022 - ETH’s Skews - Deribit)
ETH option skew actually provides interesting opportunity here.
7-day option skew is about -8pts, while BTC is only -4pts, despite the overall ATM iv spread between ETH & BTC being rather close.
Another interesting element is the relative strength ETH is displaying versus BTC; the ETH/BTC price has rallied +0.005 week-over-week.
Short-term ETH calls are too cheap compared to similar BTC calls.
There’s an opportunity here in the ∆25 space.
(April 3rd, 2022 - ETH’s Skews - Deribit)
Open Interest - @fb_gravitysucks
ETH
As we have been noticing for a few weeks now, the flow on Ether is mostly concentrated on puts.
It is difficult to establish with certainty whether it is a risk hedge or an upside exposure financing.
A two-way interest is likely, although the skew rally over the past two weeks has seen a predominance of selling puts.
(Apr 1st, 2022 - ETH Notional - Deribit)
BIG TRADES IN THE FLOW
The very active week on Ether makes it burdensome to identify clear themes.
In any case, what we saw was a rotation on calls with some important profit taking and the persistent interest towards puts.
After the recent rally, skew has been pretty steady this week, a sign that puts have been trading on both sides.
(Mar 28th - Apr 3rd, 2022 - Options scanner ETH - Deribit)
Color note of the week is that after Hayes’ recent article with the analysis of the expected merge on Ethereum where he predicts a price of $10k, some participants rushed to buy the December call.
For more insights, follow veteran crypto options trader Fabio on twitter @fb_gravitysucks
VOLUME
(April 3rd, 2022 - ETH’s Premium Traded - Deribit)
(April 3rd, 2022 - ETH’s Contracts Traded - Deribit)
Paradigm Block Insights (28 Mar - 3 Apr)
(28 Mar - 3 Apr - Volume Profile - Deribit & Paradigm)
Feel free to contact us at https://t.me/tradeparadigm & follow us at @tradeparadigm on Twitter to access the best pricing and liquidity for large trades in crypto derivatives.
VOLATILITY CONE
(April 3rd, 2022 - ETH’s Volatility Cone)
RV is down huge.
Near annual minimums for nearly all measurement windows.
REALIZED & IMPLIED
(April 3rd, ‘22 - ETH’s 10-day Realized -, and Trade-Weighted-, ImpliedVol.-Deribit)
Without a clear catalyst for change, the IV/RV premium can be harvested in ETH (as well as BTC), although selling BTC vol. is likely the better play, given the relative vol. components.