In the absence of significant news over the weekend, both Bitcoin (BTC) and Ethereum (ETH) began the week on a slightly lower note amid light trading volumes.
Key Takeaway #2
However, as the week unfolded, the market exhibited increased choppiness, characterized by notable intraday price swings.
Key Takeaway #3
The landscape changed dramatically with the SEC granting approvals to both Van Eck and Valkyrie for Ethereum Futures ETFs. This decision prompted a 5% surge in ETH prices week-on-week and implied volatility, particularly in the front end, responded in kind, with the October expiration witnessing a 3.5% increase.
Key Takeaway #4
In contrast, BTC implied volatility experienced a decline of over 5% week-on-week as the SEC deferred consideration of additional Bitcoin ETF applications.
In the absence of significant news over the weekend, both Bitcoin (BTC) and Ethereum (ETH) began the week on a slightly lower note amid light trading volumes. Realized volatility retreated into the mid-20s and the weekly macro calendar appeared uneventful. Consequently, option flows were subdued and implied volatility experienced minimal fluctuations. However, as the week unfolded, the market exhibited increased choppiness, characterized by notable intraday price swings.
The options market gained momentum, driven by front-month call spread purchases and growing interest in November upside options for ETH. The volatile price action continued into Wednesday, with a 3% rally in spot prices followed by a late-day reversal that resulted in prices settling unchanged. While rumors circulated regarding the potential approval of an Ethereum futures ETF, confirmation did not materialize until Thursday. This development proved to be a catalyst for the ETH market, leading to a significant shift in market sentiment. Interestingly, while much of the recent attention had been focused on the possibility of Bitcoin ETF approvals, the approval of an Ethereum ETF had garnered relatively little attention, a sentiment reflected in the implied volatility levels for both assets.
However, the landscape changed dramatically with the SEC granting approvals to both Van Eck and Valkyrie for Ethereum Futures ETFs. This decision prompted a 5% surge in ETH prices week-on-week and implied volatility, particularly in the front end, responded in kind, with the October expiration witnessing a 3.5% increase. In contrast, BTC implied volatility experienced a decline of over 5% week-on-week as the SEC deferred consideration of additional Bitcoin ETF applications.
Recalling last Friday, with IV at historically low levels in ETH, we recommended buying the October expiration $1600 straddle for $107. This proved to be great timing and exceptionally profitable within a short timeframe, offering gamma scalping opportunities all week long. With IV up over 3% on the week, the straddle is currently worth $130, a gain of over 20%. While we still regard implied volatility as relatively low, we anticipate some selling pressure over the weekend, making it a prudent decision to realize profits on the straddle. Furthermore, we recommended initiating a short position in the OCT/DEC Volatility Spread, capitalizing on a 10-point vol differential. This spread has since narrowed to less than 6 points and afforded some nice gamma scalping opportunities. We recommend maintaining this position into the upcoming week.
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In the absence of significant news over the weekend, both Bitcoin (BTC) and Ethereum (ETH) began the week on a slightly lower note amid light trading volumes. Realized volatility retreated into the mid-20s and the weekly macro calendar appeared uneventful. Consequently, option flows were subdued and implied volatility experienced minimal fluctuations. However, as the week unfolded, the market exhibited increased choppiness, characterized by notable intraday price swings.
The options market gained momentum, driven by front-month call spread purchases and growing interest in November upside options for ETH. The volatile price action continued into Wednesday, with a 3% rally in spot prices followed by a late-day reversal that resulted in prices settling unchanged. While rumors circulated regarding the potential approval of an Ethereum futures ETF, confirmation did not materialize until Thursday. This development proved to be a catalyst for the ETH market, leading to a significant shift in market sentiment. Interestingly, while much of the recent attention had been focused on the possibility of Bitcoin ETF approvals, the approval of an Ethereum ETF had garnered relatively little attention, a sentiment reflected in the implied volatility levels for both assets.
However, the landscape changed dramatically with the SEC granting approvals to both Van Eck and Valkyrie for Ethereum Futures ETFs. This decision prompted a 5% surge in ETH prices week-on-week and implied volatility, particularly in the front end, responded in kind, with the October expiration witnessing a 3.5% increase. In contrast, BTC implied volatility experienced a decline of over 5% week-on-week as the SEC deferred consideration of additional Bitcoin ETF applications.
Recalling last Friday, with IV at historically low levels in ETH, we recommended buying the October expiration $1600 straddle for $107. This proved to be great timing and exceptionally profitable within a short timeframe, offering gamma scalping opportunities all week long. With IV up over 3% on the week, the straddle is currently worth $130, a gain of over 20%. While we still regard implied volatility as relatively low, we anticipate some selling pressure over the weekend, making it a prudent decision to realize profits on the straddle. Furthermore, we recommended initiating a short position in the OCT/DEC Volatility Spread, capitalizing on a 10-point vol differential. This spread has since narrowed to less than 6 points and afforded some nice gamma scalping opportunities. We recommend maintaining this position into the upcoming week.
YTD 30 Day Implied Volatility BTC vs ETH
• Historically, ETH Implied Volatility has traded at a premium to BTC, as evidenced in the first half of 2023.
• The enthusiasm surrounding multiple BTC ETF applications and the upcoming halving have led to more interest in BTC options.
• ETH 30 day IV has rallied to flat with BTC for the first time in over a month on the heels of yesterday’s ETH futures ETF approvals.
ATM IV Term Structure
• Contango in both majors remains, with little change in term structure in BTC while front end ETH rallied relative to the backs.
• Approval for multiple ETH futures ETFs has led to a narrowing of the vol spread between the products.
• Apart from the October expiration, BTC continues to trade at a vol premium to ETH, attributable to the anticipation of price appreciation as we approach the halving next April.
At-the-Money Front Month Daily Implied Volatility
• Front month IV was little changed and practically mirrored last week’s daily action.
• ETH IV rallied in the front-end yesterday morning into today, as the spot market rallied almost 4% on the news of approvals for multiple ETH futures ETFs.
• 30-day Implied Volatility still remains historically cheap and will likely continue to face pressure barring a breakout of the recent range-bound trading.
BTC & ETH 25 Delta Skew (30 day)
• Skew continues to be much more volatile than outright implied volatility.
• ETH skew rallied from a 20% put premium to a slight call premium from Tuesday to Friday.
• This is a strong indication that much of the paper flow in cryptos is currently speculative paper bidding calls on rallies and puts on selloffs.
Front Month IV Curves
• 1 Month BTC 25 delta puts priced 2. 5 vols over ATM, with 25 delta calls priced 2.5 vols over ATM.
• 1 Month ETH 25 delta puts priced 3 vols over ATM, with 25 delta calls priced 1.25 over ATM.
• Despite the stronger rally in ETH on the week, BTC call skew remains more in favor. The presence of the consistent overwriting of ETH calls and anticipation of the halving are the likely reasons for this.
ETH 1x2 Call Spread Expiring March 2024
• We will continue to monitor our past two recommended trade strategies in the ETH March ‘24 contract.
• We suggested selling the $2100/$2500 1 by 2 call spread (selling the $2100 call, buying 2 $2500 calls) at flat premium.
• Initially suggested as a long-term upside play, implied volatility has rallied to 43.25%, resulting in a current premium of $15 to the two options on the strategy despite a significant selloff in the futures market.
• We recommend holding the trade at current levels.
ETH 1x2 Iron Butterfly Expiring March 2024
• Monitoring our second recommended strategy of selling one March $1900 Straddle and buying two $1600/$2200 Strangles:
• Similar to the call spread ratio, there was zero outlay of premium.
• Currently this iron butterfly ratio value remains flat.
• We view this as a long-term strategy and recommend holding through year end and adding opportunistically.
Implied Volatility - represents the market's expectation of future price fluctuations and is a key metric employed to price options contracts.
Realized Volatility - also known as historical volatility, this measures past market changes and their actual results.
Delta - a measure of the change in value of an option given a change in the underlying futures contract.
Vega - a measure of an option's price sensitivity to changes in implied volatility.
Gamma - a measure of the rate of change in delta given a change in the underlying futures contract.
Theta - a measure of the rate of decline in the value of an option over time.
Rho - the amount a theoretical option’s price will change for a corresponding one percentage-point change in the interest rate used to price the option contract.
Implied Volatility Curve - a U-shaped graphical representation of the pattern created by the implied volatilities of multiple options contracts with the same expiration date.
Term structure of Volatility Curve - the curve depicting the differing implied volatilities of options with the same strike price but different maturities.
Break-even - the amount of underlying movement the trader needs to capture in hedged P&L via gamma to offset daily theta.
Support and Resistance - key price levels in technical analysis that indicate the levels at which buying or selling pressure is likely to be strong enough to prevent the price from moving below or beyond that level.
Paper - institutional player, producer or hedger, a non market-maker.
Call - an option that gives the buyer the right, but not the obligation, to buy the underlying asset at the strike price any time before it expires.
Put - an option that gives the buyer the right, but not the obligation, to sell the underlying asset at the strike price any time before it expires.
Roll - to simultaneously close one option position and open another with the same commodity but a different strike price and/or expiration month.
Straddle - an options trading strategy that involves buying both a call option and a put option at the same strike price and expiration date.
Strangle - an options trading strategy that involves buying both a call option and a put option at different strike prices but with the same expiration date.
Put Spread - an options trading strategy that involves buying a put option at a specific strike price and selling another put option at a lower strike price, both with the same expiration date.
Call Spread - an options trading strategy that involves buying a call option at a specific strike price and selling another call option at a higher strike price, both with the same expiration date.
Iron Condor - an options trading strategy that involves simultaneously buying equidistant out-of-the-money call spreads and put spreads.
Call/Put Calendar - an options trading strategy that involves buying an option at a specific strike and selling an option at the same strike across different expirations.
Butterfly - an options trading strategy that involves buying one low strike and one high strike option and selling two middle strike options.
Iron Fly - an options trading strategy that involves buying and selling three options at the same expiration date and strike price. The strategy consists of buying one call option and one put option at the middle strike price, and selling two options at different strike prices that are equidistant from the middle strike price.
Disclosures
Purpose
This research is only for the clients of BitOoda. This research is not intended to constitute an offer, solicitation, or invitation for any securities and may not be distributed into jurisdictions where it is unlawful to do so. For additional disclosures and information, please contact a BitOoda representative at info@bitooda.io.
Analyst Certification
Michael Tauckus, the research analyst denoted by an “AC” on the cover of this report, hereby certifies that all of the views expressed in this report accurately reflect his personal views, which have not been influenced by considerations of the firm’s business or client relationships.
Conflicts of Interest
This research contains the views, opinions, and recommendations of BitOoda. This report is intended for research and educational purposes only. We are not compensated in any way based upon any specific view or recommendation.
General Disclosures
Any information (“Information”) provided by BitOoda Holdings, Inc., BitOoda Digital, LLC, BitOoda Technologies, LLC or Ooda Commodities, LLC and its affiliated or related companies (collectively, “BitOoda”), either in this publication or document, in any other communication, or on or throughhttp://www.bitooda.io/, including any information regarding proposed transactions or trading strategies, is for informational purposes only and is provided without charge. BitOoda is not and does not act as a fiduciary or adviser, or in any similar capacity, in providing the Information, and the Information may not be relied upon as investment, financial, legal, tax, regulatory, or any other type of advice. The Information is being distributed as part of BitOoda’s sales and marketing efforts as an introducing broker and is incidental to its business as such.BitOoda seeks to earn execution fees when its clients execute transactions using its brokerage services. BitOoda makes no representations or warranties (express or implied) regarding, nor shall it have any responsibility or liability for the accuracy, adequacy, timeliness or completeness of, the Information, and no representation is made or is to be implied that the Information will remain unchanged. BitOoda undertakes no duty to amend, correct, update, or otherwise supplement the Information.
The Information has not been prepared or tailored to address, and may not be suitable or appropriate for the particular financial needs, circumstances or requirements of any person, and it should not be the basis for making any investment or transaction decision. The Information is not a recommendation to engage in any transaction. The digital asset industry is subject to a range of inherent risks, including but not limited to: price volatility, limited liquidity, limited and incomplete information regarding certain instruments, products, or digital assets, and a still emerging and evolving regulatory environment. The past performance of any instruments, products or digital assets addressed in the Information is not a guide to future performance, nor is it a reliable indicator of future results or performance.
All derivatives brokerage is conducted byOoda Commodities, LLC a member of NFA and subject to NFA’s regulatory oversight and examinations. However, you should be aware that NFA does not have regulatory oversight authority over underlying or spot virtual currency products or transactions or virtual currency exchanges, custodians or markets.
BitOoda Technologies, LLC is a member of FINRA.
“BitOoda”, “BitOoda Difficulty”, “BitOoda Hash”, “BitOoda Compute”, and the BitOoda logo are trademarks of BitOoda Holdings, Inc.
Copyright 2023 BitOoda Holdings, Inc. All rights reserved. No part of this material may be reprinted, redistributed, or sold without prior written consent of BitOoda.
In the absence of significant news over the weekend, both Bitcoin (BTC) and Ethereum (ETH) began the week on a slightly lower note amid light trading volumes. Realized volatility retreated into the mid-20s and the weekly macro calendar appeared uneventful. Consequently, option flows were subdued and implied volatility experienced minimal fluctuations. However, as the week unfolded, the market exhibited increased choppiness, characterized by notable intraday price swings.
The options market gained momentum, driven by front-month call spread purchases and growing interest in November upside options for ETH. The volatile price action continued into Wednesday, with a 3% rally in spot prices followed by a late-day reversal that resulted in prices settling unchanged. While rumors circulated regarding the potential approval of an Ethereum futures ETF, confirmation did not materialize until Thursday. This development proved to be a catalyst for the ETH market, leading to a significant shift in market sentiment. Interestingly, while much of the recent attention had been focused on the possibility of Bitcoin ETF approvals, the approval of an Ethereum ETF had garnered relatively little attention, a sentiment reflected in the implied volatility levels for both assets.
However, the landscape changed dramatically with the SEC granting approvals to both Van Eck and Valkyrie for Ethereum Futures ETFs. This decision prompted a 5% surge in ETH prices week-on-week and implied volatility, particularly in the front end, responded in kind, with the October expiration witnessing a 3.5% increase. In contrast, BTC implied volatility experienced a decline of over 5% week-on-week as the SEC deferred consideration of additional Bitcoin ETF applications.
Recalling last Friday, with IV at historically low levels in ETH, we recommended buying the October expiration $1600 straddle for $107. This proved to be great timing and exceptionally profitable within a short timeframe, offering gamma scalping opportunities all week long. With IV up over 3% on the week, the straddle is currently worth $130, a gain of over 20%. While we still regard implied volatility as relatively low, we anticipate some selling pressure over the weekend, making it a prudent decision to realize profits on the straddle. Furthermore, we recommended initiating a short position in the OCT/DEC Volatility Spread, capitalizing on a 10-point vol differential. This spread has since narrowed to less than 6 points and afforded some nice gamma scalping opportunities. We recommend maintaining this position into the upcoming week.
YTD 30 Day Implied Volatility BTC vs ETH
• Historically, ETH Implied Volatility has traded at a premium to BTC, as evidenced in the first half of 2023.
• The enthusiasm surrounding multiple BTC ETF applications and the upcoming halving have led to more interest in BTC options.
• ETH 30 day IV has rallied to flat with BTC for the first time in over a month on the heels of yesterday’s ETH futures ETF approvals.
ATM IV Term Structure
• Contango in both majors remains, with little change in term structure in BTC while front end ETH rallied relative to the backs.
• Approval for multiple ETH futures ETFs has led to a narrowing of the vol spread between the products.
• Apart from the October expiration, BTC continues to trade at a vol premium to ETH, attributable to the anticipation of price appreciation as we approach the halving next April.
At-the-Money Front Month Daily Implied Volatility
• Front month IV was little changed and practically mirrored last week’s daily action.
• ETH IV rallied in the front-end yesterday morning into today, as the spot market rallied almost 4% on the news of approvals for multiple ETH futures ETFs.
• 30-day Implied Volatility still remains historically cheap and will likely continue to face pressure barring a breakout of the recent range-bound trading.
BTC & ETH 25 Delta Skew (30 day)
• Skew continues to be much more volatile than outright implied volatility.
• ETH skew rallied from a 20% put premium to a slight call premium from Tuesday to Friday.
• This is a strong indication that much of the paper flow in cryptos is currently speculative paper bidding calls on rallies and puts on selloffs.
Front Month IV Curves
• 1 Month BTC 25 delta puts priced 2. 5 vols over ATM, with 25 delta calls priced 2.5 vols over ATM.
• 1 Month ETH 25 delta puts priced 3 vols over ATM, with 25 delta calls priced 1.25 over ATM.
• Despite the stronger rally in ETH on the week, BTC call skew remains more in favor. The presence of the consistent overwriting of ETH calls and anticipation of the halving are the likely reasons for this.
ETH 1x2 Call Spread Expiring March 2024
• We will continue to monitor our past two recommended trade strategies in the ETH March ‘24 contract.
• We suggested selling the $2100/$2500 1 by 2 call spread (selling the $2100 call, buying 2 $2500 calls) at flat premium.
• Initially suggested as a long-term upside play, implied volatility has rallied to 43.25%, resulting in a current premium of $15 to the two options on the strategy despite a significant selloff in the futures market.
• We recommend holding the trade at current levels.
ETH 1x2 Iron Butterfly Expiring March 2024
• Monitoring our second recommended strategy of selling one March $1900 Straddle and buying two $1600/$2200 Strangles:
• Similar to the call spread ratio, there was zero outlay of premium.
• Currently this iron butterfly ratio value remains flat.
• We view this as a long-term strategy and recommend holding through year end and adding opportunistically.
Implied Volatility - represents the market's expectation of future price fluctuations and is a key metric employed to price options contracts.
Realized Volatility - also known as historical volatility, this measures past market changes and their actual results.
Delta - a measure of the change in value of an option given a change in the underlying futures contract.
Vega - a measure of an option's price sensitivity to changes in implied volatility.
Gamma - a measure of the rate of change in delta given a change in the underlying futures contract.
Theta - a measure of the rate of decline in the value of an option over time.
Rho - the amount a theoretical option’s price will change for a corresponding one percentage-point change in the interest rate used to price the option contract.
Implied Volatility Curve - a U-shaped graphical representation of the pattern created by the implied volatilities of multiple options contracts with the same expiration date.
Term structure of Volatility Curve - the curve depicting the differing implied volatilities of options with the same strike price but different maturities.
Break-even - the amount of underlying movement the trader needs to capture in hedged P&L via gamma to offset daily theta.
Support and Resistance - key price levels in technical analysis that indicate the levels at which buying or selling pressure is likely to be strong enough to prevent the price from moving below or beyond that level.
Paper - institutional player, producer or hedger, a non market-maker.
Call - an option that gives the buyer the right, but not the obligation, to buy the underlying asset at the strike price any time before it expires.
Put - an option that gives the buyer the right, but not the obligation, to sell the underlying asset at the strike price any time before it expires.
Roll - to simultaneously close one option position and open another with the same commodity but a different strike price and/or expiration month.
Straddle - an options trading strategy that involves buying both a call option and a put option at the same strike price and expiration date.
Strangle - an options trading strategy that involves buying both a call option and a put option at different strike prices but with the same expiration date.
Put Spread - an options trading strategy that involves buying a put option at a specific strike price and selling another put option at a lower strike price, both with the same expiration date.
Call Spread - an options trading strategy that involves buying a call option at a specific strike price and selling another call option at a higher strike price, both with the same expiration date.
Iron Condor - an options trading strategy that involves simultaneously buying equidistant out-of-the-money call spreads and put spreads.
Call/Put Calendar - an options trading strategy that involves buying an option at a specific strike and selling an option at the same strike across different expirations.
Butterfly - an options trading strategy that involves buying one low strike and one high strike option and selling two middle strike options.
Iron Fly - an options trading strategy that involves buying and selling three options at the same expiration date and strike price. The strategy consists of buying one call option and one put option at the middle strike price, and selling two options at different strike prices that are equidistant from the middle strike price.
Disclosures
Purpose
This research is only for the clients of BitOoda. This research is not intended to constitute an offer, solicitation, or invitation for any securities and may not be distributed into jurisdictions where it is unlawful to do so. For additional disclosures and information, please contact a BitOoda representative at info@bitooda.io.
Analyst Certification
Michael Tauckus, the research analyst denoted by an “AC” on the cover of this report, hereby certifies that all of the views expressed in this report accurately reflect his personal views, which have not been influenced by considerations of the firm’s business or client relationships.
Conflicts of Interest
This research contains the views, opinions, and recommendations of BitOoda. This report is intended for research and educational purposes only. We are not compensated in any way based upon any specific view or recommendation.
General Disclosures
Any information (“Information”) provided by BitOoda Holdings, Inc., BitOoda Digital, LLC, BitOoda Technologies, LLC or Ooda Commodities, LLC and its affiliated or related companies (collectively, “BitOoda”), either in this publication or document, in any other communication, or on or throughhttp://www.bitooda.io/, including any information regarding proposed transactions or trading strategies, is for informational purposes only and is provided without charge. BitOoda is not and does not act as a fiduciary or adviser, or in any similar capacity, in providing the Information, and the Information may not be relied upon as investment, financial, legal, tax, regulatory, or any other type of advice. The Information is being distributed as part of BitOoda’s sales and marketing efforts as an introducing broker and is incidental to its business as such.BitOoda seeks to earn execution fees when its clients execute transactions using its brokerage services. BitOoda makes no representations or warranties (express or implied) regarding, nor shall it have any responsibility or liability for the accuracy, adequacy, timeliness or completeness of, the Information, and no representation is made or is to be implied that the Information will remain unchanged. BitOoda undertakes no duty to amend, correct, update, or otherwise supplement the Information.
The Information has not been prepared or tailored to address, and may not be suitable or appropriate for the particular financial needs, circumstances or requirements of any person, and it should not be the basis for making any investment or transaction decision. The Information is not a recommendation to engage in any transaction. The digital asset industry is subject to a range of inherent risks, including but not limited to: price volatility, limited liquidity, limited and incomplete information regarding certain instruments, products, or digital assets, and a still emerging and evolving regulatory environment. The past performance of any instruments, products or digital assets addressed in the Information is not a guide to future performance, nor is it a reliable indicator of future results or performance.
All derivatives brokerage is conducted byOoda Commodities, LLC a member of NFA and subject to NFA’s regulatory oversight and examinations. However, you should be aware that NFA does not have regulatory oversight authority over underlying or spot virtual currency products or transactions or virtual currency exchanges, custodians or markets.
BitOoda Technologies, LLC is a member of FINRA.
“BitOoda”, “BitOoda Difficulty”, “BitOoda Hash”, “BitOoda Compute”, and the BitOoda logo are trademarks of BitOoda Holdings, Inc.
Copyright 2023 BitOoda Holdings, Inc. All rights reserved. No part of this material may be reprinted, redistributed, or sold without prior written consent of BitOoda.
