Greeks.Live & Deribit Options Market Observation 0718 —Discovering Patterns
Remarks:
As mentioned in the observations yesterday, IV is likely to fall on Friday as sellers’ positions expire and the margin is released. A couple of other interesting regularities are that Friday’s trading volume will be significantly higher than the weekend, and IV will be slightly higher from the weekend.
Of course, these are based on the recent little bitcoin price volatility, and Discovering Patterns will make trading more interesting, but it’s also easy to be fooled by the illusion of the market.
This report is jointly published by Deribit and Greeks. Live.
【Performance of the underlying assets】
BTC historical volatility:
10d 21%
30d 28%
90d 59%
1Y 81%
ETH historical volatility:
10d 30%
30d 44%
90d 68%
1Y 100%
Even if IV fell so much, it would be significantly higher than RV. Even traders who are new to the market should know that the coin toss has several positives in a row and the probability of the next negative is still one-half. But market movements are not independent events, which is why the discovery of regular phenomena is so much controversy.
【BTC Options】
BTC options open interest was down slightly at $1.0billion.
The implied volatility (IV) of each standardized expiry date is as follows:
Today: 1m 48%, 3m 62%, 6m 69%
7/17：1m 50%, 3m 64%, 6m 71%
Implied volatility is clearly on a downward spiral today, with short-term volatility being depressed around the expiry while driving intermediate to long-term Volatility is down slightly.
Skew:
Today:1m -10.1%, 3m -2.4%, 6m +2.3%
7/16：1m -12.1%, 3m -3.1%, 6m +0.5%
Short-term Skew is as high as 12%, and this is obviously due to the massive selling of OTM call options, and as the margin is released, some sellers begin to sell regardless of price.
At times like this, we can take advantage of PCP synthesis. For example, if I wish to purchase a Jul31–9000C, at the current skew, I can choose to purchase a Jul31- 9000p while long equivalent futures.
Flows:
The Put/Call Ratio is 0.52. More than 67% of orders were call orders.
In terms of position changes, a large number of OTM options expired yesterday, about 19,000 BTC options expired, most of which were voided. It is particularly important to note that block trades are starting to appear in more and more portfolios.
The distribution of positions is shown in the chart, with open interest surpassing 55,400 BTC at the end of the month for 31Jul-expiry.
【ETH Options】
ETH options open interest is USD 158million.
Trading volumes drop.
The IV of each standardized expiry date:
Today: 1m 52%，3m 66%，6m 74%
7/17: 1m 53%，3m 67%，6m 74%
The short-term volatility rises slowly and the long-term volatility is stable.
Skew:
today: 1m -0.8%, 3m +5.4%, 6m +5.7%
7/17： 1m -0.2%, 3m +6.6%, 6m +8.1%
For the ETH market, sell call trading is up to 37%. There are undoubtedly coin-whales who are starting to apply options for revenue enhancement.
Have a good time.
Jeff Liang
CEO of Greeks.Live
July 18, 2020
