Greeks.Live & Deribit Options Market Observation 0622 — Volatility Risk Premium Increases

Remarks:

With the market’s persistent volatility expectations and the drop in realized volatility, VRP is gradually increasing.

This report is jointly published by Deribit and Greeks.Live.

【Performance of the underlying assets】

BTC historical volatility:

7d 16.08%

14d 38.41%

30d 55.72%

60d 66.49%

1Y 89.24%

ETH historical volatility:

7d 27.86%

14d 48.87%

30d 66.23%

60d 70.25%

1Y 104.67%

Realised volatility continues to drop. The candlestick chart has been almost level over the past 10 days or so.

【BTC Options】

BTC options open interest is USD 1.1 billion, a slight drop from the new high. This might be a result of users’ prevention of unpredicted price movements during settlement on June 26 which will result in considerable Pin Risk.

The trading volume has decreased.

The implied volatility (IV) of each standardized expiry date is as follows:

Today: 1m 60%, 3m 68%, 6m 73%

19 June: 1m 61%, 3m 69%, 6m 74%

IV has decreased slightly. With the market’s persistent volatility expectations and the drop in realized volatility, VRP is gradually increasing.

Figure 1: BTC ATM Implied Volatility

Skew:

Today: 1m -10%, 3m -1.6%, 6m +3.5%

19 June: 1m -11%, 3m -0.6%, 6m +4.7%

Skew has been stable. The left-skewed distribution in front months is significant.

Figure 2: BTC 25d Skew

The Put/Call Ratio is 0.45, at a low level again. This indicator has been cited by the futures speculative market outside the options market as one of the indicators for judging price change expectations.

Figure 3: BTC Put/Call Ratios

【ETH Options】

ETH options open interest is USD 150 million, remaining at a high level.

The trading volume has decreased. The disappearance of volatility is not conductive to active trading.

The IV of each standardized expiry date:

Today: 1m 61%, 3m 71%, 6m 77%

19 June: 1m 65%, 3m 71%, 6m 77%

The IV in front months continues to decrease. This IV has dropped to the lowest level over the past year.

Skew:

Today: 1m -4.2%, 3m +3.1%, 6m +4.3%

19 June: 1m -3.6%, 3m +2.9%, 6m +7.2%

Skew has been stable.

The Put/Call Ratio of the open interest remains at 0.83.

ETH options open interest by strike is shown in Figure 6 below, with ATM options, slightly OTM Calls and Puts taking up relatively larger percentages.

Figure 6: ETH Options Open Interest by Strike (k3)

Most of the open interest by expiry is significantly concentrated in June. The open interest of ETH options expiring at the end of September and the end of December is also significant.

Figure 7: ETH Options Open Interest by Expiry (k3)

Jeff Liang

CEO of Greeks.Live

June 22, 2020