Option Flow: Vol Discount

https://insights.deribit.com/option-flows/option-flow-vol-discount/

In this week’s edition of Option Flows, Tony Stewart is commenting on the market movements over the weekend.

Size buying of Apr, Jun, Sep+Dec 65-75k Calls. Possible TP and rollup from the Jun 40k Calls.

ETF Net inflows materially improve and clear Spot bid.

And with BTC Implied Vol at a discount to ETH Vol, despite where all the action remains, the Fund took the upside opportunity.

2) Fast money buying of Feb 48-50k Calls as continued ETF data hits the market.

And then a mass of Apr 65k (x500), Jun 65k (x1600), Jun 70k (x1k), Sep65k+Dec75k (x500) net $8.5m premium scooped up in European hours.

Noticeable a seller of 430x Jun 40k Calls – $4.5m. TP+Roll up?

3) Whether this was a rollup or not, it equated to a net ~375k of Vega aggressively bought from the market.

This was executed at a moment when BTC IV traded at a discount to ETH IV, despite BTC Spot outperforming ETH considerably.

Interestingly, ETH bounced back on little flow.

4) Ofc, this Fund buyer of Upside Calls not only bought decent level IV, but also well-priced Call Skew after a period where Puts had been more in demand and Calls less favored on the post-ETF-news sell-off.

Selecting Apr+ maturities hints at a longer-term ETF+Halving narrative.

View Twitter thread.

AUTHOR(S)

Tony Stewart

ex-MS Head of Trading desk /BTC Vol. Prop trading /Option Market forensics/ Alter Ego account Digital Asset arena. Tweets are my opinion, not financial advice.


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Option Flow: Market Support

https://insights.deribit.com/option-flows/option-flow-market-support/

In this week’s edition of Option Flows, Tony Stewart is commenting on the continued BTC ETF net inflows that have assisted an overall market support.

7days of BTC ETF net inflows have assisted market support in terms of buys & sentiment.

But BTC Option flow has been subdued and technical rather than directionally informative, with low RV punishing holders of optionality.

Calendar sellers of Vega.

ETH Overwriter concern.

2) Rangebound trading for majors has resulted in lower Realized Vol pulling down Implied Vol.

Decay and Gamma losses at the front end have punished Long-holders of optionality.

Observed technical trades have been selling Calendars – ie selling April+June to buy Feb shorts.

3) A structural BTC trade executed two weeks back to buy April and sell ratioed Feb Strangles was rolled back via selling the April 34-55k Strangle to buy back Feb Gamma via the Feb 41-45k Strangle x1.5k.

Similar ‘steepner-compression’ flow, selling Jun-Feb 45k Call Calendars.

4) LPs have in general been content to sell Vega+Gamma in this rangebound market.

But there is clear evidence of flows (not impacting IV) where Funds have been nibbling at these IV levels.

BTC Jun 40-55k Strangle, Jun 30k Puts, Mar 50k Calls all bought into drifting IV levels.

5) ETH Spot has started to perform, perhaps from BTC strength, ETF narrative, or ETH staking demand.

This triggered an ETH Feb 2.5k Call short-cover last week and at 2350+ trading level now must be of concern to force some reaction to the large short in the ETH Feb 2.4k Calls.

View Twitter thread.

AUTHOR(S)

Tony Stewart

ex-MS Head of Trading desk /BTC Vol. Prop trading /Option Market forensics/ Alter Ego account Digital Asset arena. Tweets are my opinion, not financial advice.


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Option Flow: Observing

https://insights.deribit.com/option-flows/option-flow-observing/

In this week’s edition of Option Flows, Tony Stewart is commenting on the market movement and how the reduction in GBTC selling has impacted.

As anticipated, it took only a modest reduction in GBTC outflows (in isolation) to red-flag the bulls and force under-allocated Funds to buy Calls.

Apparent short-cover of BTC March OTM Calls followed by aggressive Feb Call buying from Funds+Fast money.

Overwriter observing.

2) Mixed OI data suggest that BTC Mar75k x1800 ($125k premium) and Mar 50k x1055 ($1.1m premium) perhaps short-covering Calls from higher Spot or structure.

But buyers of Feb 43-48k Strike range were certainly net-adding exposure.

Only a Feb2 42-44k Strangle seller opposed Vol.

3) This hasn’t helped out LPs according to data that shows dealers short BTC Gamma and long ETH Gamma – the latter from the large Call-Overwriter who is clearly monitoring ETH Spot moves but has yet to flinch with any roll-up/cover plans.

So ETH Vol premium has retraced to flat.

View Twitter thread.

AUTHOR(S)

Tony Stewart

ex-MS Head of Trading desk /BTC Vol. Prop trading /Option Market forensics/ Alter Ego account Digital Asset arena. Tweets are my opinion, not financial advice.


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Option Flow: All Eyes On GBTC

https://insights.deribit.com/option-flows/option-flow-all-eyes-on-gbtc/

In this week’s edition of Option Flows, Tony Stewart is commenting on the market movements with focus still being on the GBTC outflows and ETF inflows.

Market participants are closely watching momentum in GBTC outflows and ETF inflows, and aware of MtGox+Celsius coins.

Currently price equilibrium.

ETH Spot ETF delay has only strengthened the ETH Overwriter’s conviction.

BTC April/Feb Structure sells more Gamma.

Dvol 46.5%.

2) Most ETH Options activity has been related to the ETH overwriter – last report selling the Feb 2.7k Call – this time rolling this short closer to the ATM via the 2.4k Call.

2.5k Call sold too.

The play is to stack yield now, play short-term rangebound but medium-term bullish.

3) Spot dump to ~38.5k/2150 allowed LPs to take advantage of Gamma, and IV reacted positively to ETH Calls bought near lows.

But as soon as Spot bounced back into the comfort zone, the excess Gamma from the Over-writer choked LPs.

BTC Apr-Feb Strangle swap dumped BTC Gamma.

4) Most ETH Over-writer flows have taken place on DSOB, but the BTC multi-leg package was best placed on Paradigm.

The structure was to buy 1k Apr 41k Straddles to sell 1.5k Feb 37-45k Strangles.

This is long Vega (halving), short Gamma (expect rangebound now) collecting Theta.

5) The monthly chart below shows the increase in IV due to ETF anticipation, and the retrace as news was confirmed and pullback in Spot.

The pauses for clarification on whether GBTC or the newly launched ETFs would dominate have resulted in inactivity during APAC+Euro sessions.

View Twitter thread.

AUTHOR(S)

Tony Stewart

ex-MS Head of Trading desk /BTC Vol. Prop trading /Option Market forensics/ Alter Ego account Digital Asset arena. Tweets are my opinion, not financial advice.


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Option Flow: When Will The Tipping Point Be?

https://insights.deribit.com/option-flows/option-flow-when-will-the-tipping-point-be/

In this week’s edition of Option Flows, Tony Stewart is commenting on the market movements which ones again was affected by the ETF launch and especially GBTC.

After Spot sold off 15%, the week promised volatility on GBTC-ETF wargames.

Instead, Mon-Wed Spot 3% rangebound, failed Calls sold, and ETH overwriter further crushed ETH Dvol 17%, BTC Dvol followed lower 8%.

Vol longs bled.

Until Feb Straddles lifted Thurs.
BTC tested 40k.

2) The most impactful IV selling trades originated on ETH, predominantly Call selling, some giving up on Longs, and some overwriting ETH Spot AUM.

Feb 2.7k Calls sold 45k.
Mar 2.9k Calls sold 28k.
Jan 2.6k covered to sell Apr 2.9k Calls 25k.

Significant other Call 2way in Feb Calls.

3) ETH vol over the week fell from 64% to 47%, using Dvol proxy. BTC IV fell on similarly structured Call selling but from 55-47%.

Vol buyers were run over as Spot failed to react to GBTC-CME-ETF tug-of-war flows early in the week.

ETH gave back all its premium Vol gains cf BTC.

4) One Fund Thursday US session sensed a change coming and bought the BTC 44k Staddle at 46% x1k.

Within an hour Spot had broken its support at 42.3k and by the US close was trading 40.5k.

Such was positioning, pre-expiry-pre-weekend, that IV barely reacted, 7day up 5%, 1m up 2%.

5) Another test on Friday down to 40.3k met with Jan+Feb Call buying and heavy Spot bids layered down to 40k as ETFs, Funds (and shorts) looked to take advantage of 5 consecutive days of GBTC wallet transfers, CME selling, and Coinbase discounts.

When will the tipping point be?

View Twitter thread.

AUTHOR(S)

Tony Stewart

ex-MS Head of Trading desk /BTC Vol. Prop trading /Option Market forensics/ Alter Ego account Digital Asset arena. Tweets are my opinion, not financial advice.


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Option Flow: Sell The News

https://insights.deribit.com/option-flows/option-flow-sell-the-news/

In this week’s edition of Option Flows, Tony Stewart is commenting on the market movements after the BTC ETF approval.

GBTC selling compounded the ‘Sell the news’ ETF launch as Great Expectations unmet, at least not yet.

At first buyers of Jan50k, Feb+Mar 50-60k Call spreads x3k bought on initial strength & dips.

But then, buying turned to downside, with Jan 40-42k Puts swept, and rewarded.

2) Given the quantum of the moves and unprecedented event, Option volumes took a back seat, with many participants already having positioned.

Sell flows that offset the buying came from unwinds of Calls across the Term-structure, Jan 47-49, Feb 47-53, and Mar+Jun ITM+ATM Strikes.

3) Not surprisingly, when Option flows flipped from Call buying to Call unwinds and Put buying, Puts firmed and the result was to move the short-term 25delta Skew negative (in terms of the Call).

4) Perhaps more surprisingly given the large Realized Vol shock higher was a very muted reaction in Implied Vols resulting in a rare negative VRP.

NB as a reminder RV can illustrate the environment, but is backward-looking while IV is forward-looking – an estimate of future vol.

5) BTC Dvol sits at 55%, ETH Dvol is at 64%.

Most focus will continue this week to reside with BTC, but ETH is having its moment with counterstatements from BlackRock and SEC on a potential ETH Spot ETF, which created choppy 2-way flow in Spot, much heralded by long Gamma holds.

View Twitter thread.

AUTHOR(S)

Tony Stewart

ex-MS Head of Trading desk /BTC Vol. Prop trading /Option Market forensics/ Alter Ego account Digital Asset arena. Tweets are my opinion, not financial advice.


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Option Flow: BTC Spot ETF Approved

https://insights.deribit.com/option-flows/option-flow-btc-spot-etf-approved/

In this week’s edition of Option Flows, Tony Stewart is commenting on the market movement pre and post BTC Spot ETF approval.

Finally, after a test run the day prior, BTC Spot ETF was approved.

Expectations so telegraphed that BTC reaction was underwhelming, and all the tension wound-up in Jan12 longs dissipated, IV crushed.

Attention rotated to ETH, Spot surging, and 50k Feb Call spreads bought.

2) On the announcement and BTC underreaction, MMs promptly marked Jan12 down 25% in one quick adjustment.

Some longs quickly exited, but many are holding awaiting signals from the ETF capital inflows.

With mixed flows, tomorrow’s ‘ETF expiry’ IV has fizzled out to losing 50%.

3) Most of the elevation in Implied Vol originated at the Gamma-loaded front end of the curve.

7day rolling expiry (blue line)
30day rolling expiry (orange line).

Both were decimated as would be expected from such an underpromised immediate reaction.

4) 7day IV has fallen back so much that it now sits in line with 7day Realized Vol.

The market awaits the success of day1 ETF capital inflows.

5) Meanwhile, attention turned to an ETH ETF, some time away, but having seen the BTC run-up rally the narrative is powerful.

Scrambled buying of 30k ETH Jan12 2.4, 2.45, 2.5k Calls set the tone, ~50% of which were short-covering.

Then 50k Feb ~27-31 Call spreads Fund acquired.

6) ETH IV remained orderly during yesterday’s move.
MMs were initially long Gamma, although this was reduced as the pre-mentioned buyers paid up for supply.

BTC Dvol 60%, ETH 68%

Momentum moved from BTC to ETH, and the previous large seller of BTC IV to buy ETH IV benefitting.

View Twitter thread.

AUTHOR(S)

Tony Stewart

ex-MS Head of Trading desk /BTC Vol. Prop trading /Option Market forensics/ Alter Ego account Digital Asset arena. Tweets are my opinion, not financial advice.


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Option Flow: Speculations

https://insights.deribit.com/option-flows/option-flow-speculations/

In this week’s edition of Option Flows, Tony Stewart is commenting on the latest market movements, and the report release from Matrixreport speculation a decline of the BTC ETF approvals.

Speculation by a Matrixport independent analyst that the SEC may delay imminent ETF approval was circulated around news sources during a period of high leverage, funding, and positive sentiment, which some argued triggered a 10% BTC cascade.

Bullish Option positions unaltered.

2) All signs so far from SEC, ETF providers, and exchange meetings have pointed to an approval next week, but the market has known this probability lies in the ~90+% bracket, not 100%.

Rumors and reports were bound to be promulgated in advance and this is what has held VRP high.

3) Some well-timed Jan 40-42k Puts were bought before the cascade, but nothing out of the ordinary in terms of size.

During the episode, Vols naturally spiked (1m Dvol 5%, 2week IV 10%), but Option flows were apathetic.

Vol settled back quickly as Spot rallied back to 43k.

4) Funding did retrace by about 5% annualized eg BTC Mar futures were pricing in 20%+ APR, now ~15%.

Much action – indeed flash crash style – occurred in Alts where funding and leverage were far higher and many Alts saw 50% drawdowns before bouncing back – some up on the day!

5) When part of your AUM is flipping 50%+ it can be ‘quite distracting’ from majors where a 10% move hedged or plays in place for the SEC decision need little supervision.

Bullish Option plays remain intact; very little adjustment.

Fresh buyer of Jan44-50k x1k Call spreads added.

View Twitter thread.

AUTHOR(S)

Tony Stewart

ex-MS Head of Trading desk /BTC Vol. Prop trading /Option Market forensics/ Alter Ego account Digital Asset arena. Tweets are my opinion, not financial advice.


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Option Flow: Calm Before The Storm

https://insights.deribit.com/option-flows/option-flow-calm-before-the-storm/

In this week’s edition of Option Flows, Tony Stewart is commenting on the very active holiday season, and what to expect from here.

Cliche, but was today the calm before the storm?

After such an active holiday season, yesterday’s strong rally, vol squeeze, and exit unwind of the BTC Jun65k+Jun85k Calls; today saw a couple technical trades, but otherwise a relaxation in Spot, Vol and funding.

BTC

2) BTC+ETH flows have consistently observed bullish Call (+spreads) ahead of next week’s ETF decision.

IV has been pushed higher on the expectation and risk management of the event, widening the IV-RV premium.

3) Some end-of-year selling of Delta occurred but was swallowed up by a large spot buyer.

Likewise, the Jun 65k+85k Call longs that signaled such optimism unloaded most if not all of the remaining position, $125k+ net vega, but other than impacting far upside had little impact.

4) Today, only an opportunistic BTC Mar60, Jun70k Call calendar buyer of the Jun took advantage of depressed far OTM Jun upside Skew (Jun65+85k seller)…and a Jan26 54-60k 1×2 Call spread bought OTM convexity.

IV drifted.

NB BTC focus, but BTC Dvol discount to ETH: 64% cf 69%.

View Twitter thread.

AUTHOR(S)

Tony Stewart

ex-MS Head of Trading desk /BTC Vol. Prop trading /Option Market forensics/ Alter Ego account Digital Asset arena. Tweets are my opinion, not financial advice.


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Option Flow: Bullish Exposure

https://insights.deribit.com/option-flows/option-flow-bullish-exposure/

In this week’s edition of Option Flows, Tony Stewart is commenting on the latest market movement while we come to an end of 2023.

ETH Mar 2k-3k Call spread bought x30k. Hated ETH rotation as BTC+loved Alts Pull-back.

ETH Dec ATM bought, and Jan+Mar 3k Calls bought x25k, pushing ETH Dvol >60%, while BTC Dec ATM sold and DVol drifts <57% as anticipation of an imminent pre-holiday BTC Spot ETF diminishes.

2) Uncommon to see an ITM-OTM Call spread bought, furthermore on ETH.
OI shows this as opening.

But this style of Call spread (rather than an ATM/OTM-OTM spread) is often employed as ETH Delta replacement but with a fixed invalidation, <2k.

Remains bullish exposure, long basis.

3) With ETH pushing >3k and back in vogue (temporarily?), some seeing the value in a post-BTC-Spot-ETF-approval world where ETH may become the focus.

ETH 3k Calls bought 25k for end Jan+Mar expiries.
Small clip of buying ETH Gamma to sell BTC Gamma executed.

Combined Dvol >60%.

View Twitter thread.

AUTHOR(S)

Tony Stewart

ex-MS Head of Trading desk /BTC Vol. Prop trading /Option Market forensics/ Alter Ego account Digital Asset arena. Tweets are my opinion, not financial advice.


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Option Flow: Bets Placed

https://insights.deribit.com/option-flows/option-flow-bets-placed/

In this week’s edition of Option Flows, Tony Stewart is commenting on how the market reacted on the latest filings vs the potential BTC ETF.

Quick succession ETF managers+SEC meetings and almost immediate amendments, submitting to ‘Cash create’ Spot ETFs rather than ‘in-kind’ secures SEC demands all but guaranteeing the approval.

A raft of Dec OTM Calls were bought as BTC surged>43k as bets placed on imminent news.

2) Blocks and DSOB purchases of low-premium bets via Dec29 46-50k Calls triggered by what appears to be seasonal handshakes between the ETF parties and the SEC relating to BTC Spot ETF ‘Cash’ construction.

One opposing trade as Dec 38k Puts bought >1k for end-of-year protection.

3) Conspicuous that all these Call purchases were imminent bets/punts/underexposure via the Dec29 expiry.

Funds already have in place their bets in Dec in case of an early surprise, and then Jan-Jun exposure via Calls(+spreads).

The Options market is still pricing in Jan8-10th.

View Twitter thread.

AUTHOR(S)

Tony Stewart

ex-MS Head of Trading desk /BTC Vol. Prop trading /Option Market forensics/ Alter Ego account Digital Asset arena. Tweets are my opinion, not financial advice.


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Option Flow: ETH Rotation?

https://insights.deribit.com/option-flows/option-flow-eth-rotation/

In this week’s edition of Option Flows, Tony Stewart is commenting on the past few days market movement, and a possible rotation into ETH.

A temporary delay in proceedings as BTC stalls, Vol drift, BTC Put(+spreads) bought, BTC retraces, rotation to ETH initially looks strong, ETH Overwriter non-reaction, BTC+ETH Vol dumped, focus turns away to rampant Alts, before BTC relights forcing re-engagement of BTC Calls!

2) 44k initiates some ETH rotation, aligned with raging Alts. BTC IV performance and related unwinds of Calls, while hopes the ETH overwriter may buy back Jan 2.4k Calls keeps ETH IV>BTC. But reaction by the ETH overwriter not forthcoming; less short Calls, better collateralized?

3) Stall + IV underformance perhaps triggered a Vol sale of 1k BTC 44k Straddles and 18k ETH 2.4k Straddles; unclear ofc if a Vol proxy sale vs a Long Vol book or an opening trade, but the former seems more likely in current market conditions.

4) The Spot stall also catalyzed Put(+spread) buying in Dec and some far OTM Puts in Jan+Mar are starting to be accumulated.

A BTC retrace back to 43k came as expected, while ETH powered higher, more Calls bought.

But BTC re-engaged, bouncing to 44.7k, forcing Call deployment.

View Twitter thread.

AUTHOR(S)

Tony Stewart

ex-MS Head of Trading desk /BTC Vol. Prop trading /Option Market forensics/ Alter Ego account Digital Asset arena. Tweets are my opinion, not financial advice.


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Option Flow: Gifting Dealers Gamma

https://insights.deribit.com/option-flows/option-flow-gifting-dealers-gamma/

In this week’s edition of Option Flows, Tony Stewart is commenting on the recent rally to around $40k.

The breach >40k did not catapult IV higher as some hoped but resulted in the opposite, as long-held 40k+42k Dec Calls crystalized exits, spot 40.7k, gifting dealers Gamma.

Exposure not rolled.

But as BTC >41k, Jan42k Call rolled to Jun60k Call and Sep40k Dec45k Dec50k bought.

2) The Vol path to 40k was not as Longs had wished.
A fairly constant Vol with frequent Spot pull-backs dashed hopes of explosive IV reactions.

These long-held 40+42k Calls probably brought frustration in their expected performance and when 40k was breached, 3k+ ($7.5m) purged.

3) There was no sign of rolling exposure from these exits.
But as Spot rallied strongly towards 42k, Funds took advantage of dampened IV to buy Sep40k, Dec45k + Dec50k Calls x2k, and another to TP the Jan 42k Calls but to maintain hopium by rolling up and out to the Jun60k Call.

4) While Spot was following the plan hitting and challenging the 69k-15.5k 50% fib at 42250, Vega IV refused to join the party, only near-term Gamma reacting to any degree at all.

Confirms a well-telegraphed, expected, risk-managed move.

Flow now two-way.
Bullish position bias.

View Twitter thread.

AUTHOR(S)

Tony Stewart

ex-MS Head of Trading desk /BTC Vol. Prop trading /Option Market forensics/ Alter Ego account Digital Asset arena. Tweets are my opinion, not financial advice.


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Option Flow: Deadline Approval Approaching

https://insights.deribit.com/option-flows/option-flow-deadline-approval-approaching/

In this week’s edition of Option Flows, Tony Stewart is commenting on how the majority of the traders react up the coming deadline for BTC ETF approval.

Increased Jan 10th deadline approval odds have not surprisingly pushed BTC+ETH to challenge year highs.

Option market ‘Call’ed this for some time, but resistance at 38.5k/2.1k frustrating what has been an obvious long upside trade.

IV drift. Call spreads favored + employed.

2) Persistent failures to breach 38.5k have forestalled pure Long Calls, as IV has drifted and Theta both taking chunks out of profits.

Greater moves to more mitigating structures – upside exposure, reduced Vega+Theta:
BTC Dec 39-45k Call Sprd.
ETH 2.6-3.2k + 2.4-3k Call Sprds.

3) BTC Dvol ~50% is current support, drifting back from 60% on the first attempted summit of Spot year highs.

ETH relative rise above the horizon short-lived, as the ETH Overwriter applied IV pressure, and BTC ETF narrative approaches first.

But ETH upside interest perceptible.

View Twitter thread.

AUTHOR(S)

Tony Stewart

ex-MS Head of Trading desk /BTC Vol. Prop trading /Option Market forensics/ Alter Ego account Digital Asset arena. Tweets are my opinion, not financial advice.


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Option Flow: Mixed Trades

https://insights.deribit.com/option-flows/option-flow-mixed-trades/

In this week’s edition of Option Flows, Tony Stewart is commenting on the market post DOJ-Binance statements.

A panic/play with strong buying of Nov 35-36k Puts x3k prior to the Doj-Binance statements, and Spot almost fulfilling down to 35.6k.

As one prominent actor left the stage, BTC >36.5k.

Mt Gox info stimulated an ETH/BTC bid.
Just as (THE ?) ETH Call Overwriter actor returns.

2) Differing Binance reactions led to Nov24 35-36k Puts purchased for downside, plus Dec(38-40k), Jan(50k)+Mar(45k) Calls being bought for upside.

Spot whipsawed.

IVs remained quite stable, with firmness before the official announcement, and some relief following.

Captured:

3) If we get through Thanksgiving unscathed, the BTC term-structure will start to represent a clear Jan BTC Spot ETF decision bid.
Funds moving exposure to Jan from Dec and buying Jan Calls for outperformance.

Assumes two things:
1. SEC Jan decision
2. Jan IV offsets Xmas Theta.

4) With news from Mt Gox that they are preparing, over a period, distributions to its creditors, ETH/BTC Spot firmed this morning.

The ETH term-structure also has some kinks in Jan and March with no ETH approvals set; although ofc a BTC approval will create an ETH reaction.

5) Forensics show familiar patterns in terms of execution as one large Entity has decided to take advantage of the Jan IV blip and sell Jan 2.4k Calls, (perhaps some Dec 2.2+2.3k Calls too) while also there has been short-covering in Nov 1.65-1.75k Calls.

Co-incidence? OWE back?

View Twitter thread.

AUTHOR(S)

Tony Stewart

ex-MS Head of Trading desk /BTC Vol. Prop trading /Option Market forensics/ Alter Ego account Digital Asset arena. Tweets are my opinion, not financial advice.


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Option Flow: Allocators Spoilt For Choice

https://insights.deribit.com/option-flows/option-flow-allocators-spoilt-for-choice/

In this week’s edition of Option Flows, Tony Stewart is commenting on the market movement, and the sudden ETH interest after Blackrock’s ETH ETF filing.

Some impatience in the last report from Call sellers was punished as BTC surged to 38k on the back of strong Spot buying. But an almost simultaneous registration by Blackrock of an ETH Trust caught the market offside and a huge rotation ignited.

Allocators spoilt for choice!

2) BTC+Alts were on fire, ETH lagged.

Blackrock’s ETH Trust registration suggests an ETH Spot ETF application sooner than the market had expected.

A huge rotation created a cascade of over-leveraged Alts, a large BTC Spot seller, ITM+ATM BTC Call sellers.

ETH Spot + IV pumped.

3) Note how in the above trade summary, shorts covered, fresh longs initiated in the 2-2.4k Strikes.

At the same time, Funds TPd on BTC Calls and shifted over to ETH.
This caused a large supply of BTC Vol+Delta; DVol flipped from +ve BTC, to +ve ETH.
ETH broke above the horizon.

4) BTC dropped <36k briefly, Alts had a leverage cascade.
But both have now recovered strongly, and ETH lost a little of its shine, retracing on a relative basis.

BTC upside still continues to look well positioned for upside via Options.

Now BTC, ETH, Alts all have narrative.

View Twitter thread.

AUTHOR(S)

Tony Stewart

ex-MS Head of Trading desk /BTC Vol. Prop trading /Option Market forensics/ Alter Ego account Digital Asset arena. Tweets are my opinion, not financial advice.


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Option Flow: A Perfect Storm

https://insights.deribit.com/option-flows/option-flow-a-perfect-storm/

In this week’s edition of Option Flows, Tony Stewart is commenting on Risk management, forced short closure and vast profits.

Confidence: clear signals for BTC Spot ETF, Fink flight to quality, Deribit Margin Model adjustments, and under-allocated Crypto Funds fused to ignite an explosive rally from 30k to 35k.

Risk management, forced short closure, vast profits.

The Definitive:

2) Sunday saw the first signs of what was coming.
ETH nudged 1625. ETH Nov1.6k+1.65k Calls lifted 75k.

On CME open+APAC, BTC+ETH Spot found buyers.
BTC touched 31k, ETH 1.7k by the European Open.

ETH Nov1.65k+1.7k+Dec1.8k Calls short-covered by OWE x100k

DB posted margin reqs.

3) BTC Options saw opposing flows, as when the rally failed initially at 31k, there was a total of $10m of premium that flooded the market with Gamma via profits taken in Oct31k+Nov30+31k Calls.
These entities did not appear to roll profits.
Another rolled Oct32k to Dec34k x1.5k.

4) Despite the BTC onslaught of Gamma, IV firmed.
RV was increasing.
Prudent Deribit margin risk management procedures were announced and while not immediate, put shorts on notice.
Buyers entered.
Nov 33k+Nov34k Calls bought 3k, funded by Dec40+45k Calls.
Nov29k Calls covered 1k.

5) Upward momentum was building.
As US tradfi markets shut Monday, Crypto unleashed.

BTC spiked from 31.5 to 34k within minutes.
ETH from 1.7 to 1.8k.
Retrace back to 32.5k/1750 just fueled another move to 35k/1850.

MMs forced to widen markets. Zero got blocked.
Fast Market.

6) Stuff got messy; liquidity after a few minutes returned; thankfully, as there were some large short-covers to execute.
On ETH Nov1.7k+Dec1.9k Call covered 60k.
On BTC Oct32+34k, Nov29k, Dec 30k x5k.

How much these contributed to Spot is debatable; D1 active enough.
IV pumped.

7) While some near-dated expiries briefly breached 100IV, Dvol topped out at about 64% BTC, 55% ETH.

Orderly when viewed against previous fast markets.

[Since Jan1 2020]

8) Short Options are always first to act in Fast mkts.
IV pumps.
Long options then hold on to their profits as long as they mentally can, before rolling or dumping.

Those that rolled:
Dec 34-40k, Dec35-40k, Nov33-35k x6.5k.
Those that dumped:
Jun27k + Dec36k Calls x4k (DSOB).

9) Jun27+Dec36k Calls were bought aggressively a month ago, and dumped aggressively, both times DSOB.

Like the Nov30+31k Calls on Monday have not rolled up profits (yet).

The Dec Call spread and similar in Nov rolling up and out to Mar show a willingness to believe more upside.

10) Note on the above chart the cumulative positions remaining, with many Funds funding more upside with selling Puts.

The Rolling had little impact on Vol despite the size.

The Dumping did, and was actioned at the point when IBTC was removed from DTCC (now reinstated).

11) It is conspicuous that despite CT talking of a huge blow-out in ETH vol, the OWE rebuys did not have that ‘desired’ impact.

The trades are noticeable if you squint, but contained.

ETH IV remains at a discount to BTC.
And action since has been very muted on ETH.

12) Now a moment for many MMs to re-position after active trading – check risk slides – and for Funds+Retail to assess what next, and perhaps reposition and confirm.

BTC Dvol 55%, ETH Dvol 49%.

OWE significantly reduced Options positions, but assuming still long ETH; finished?

View Twitter thread.

AUTHOR(S)

Tony Stewart

ex-MS Head of Trading desk /BTC Vol. Prop trading /Option Market forensics/ Alter Ego account Digital Asset arena. Tweets are my opinion, not financial advice.

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Option Flow: Easy Gamma

https://insights.deribit.com/option-flows/option-flow-easy-gamma/

In this week’s edition of Option Flows, Tony Stewart is commenting on trades during the weekend, and what to expect this week.

Wknd smart money bought Oct 28+28.5k Calls v BTC 27k, on the US govt shutdown pushback.
Risk-aversion unwinds on CME open Sunday jettisoned risk higher, BTC+ETH soaring 4%.
Option IV failed to react – easy Gamma.

ETH futures ETF FOMO Call buyers then pumped it.

Underwhelming.

2) Conspicous wknd spend of $350k on Oct20 28+28.5k Calls, partially funded by selling Nov 36k Calls blocked on Paradigm, sold into by perhaps unsuspecting MM unaware of the US govt shutdown pushback.

CME-related short-squeeze was enacted.

Forced liquidations, but no IV reaction.

3) Most Option participants weren’t around to play, IV didn’t move, little traded and only a few took advantage of the cheap Gamma from the immediate move, and ahead of the reaction to ETH ETF futures to trade <24h.

When Funds awoke, they scooped up Gamma, via Nov+Dec ~32k Calls.

4) ETH natives were less impressed and awaited the actual ETH Futures ETF data, which was very underwhelming even for day1.

Quite interestingly, ETH did not shine for long as the narrative, ETH Option flows subdued and following rather than leading.

BTC+ETH plunged from 28.6/1760.

5) IVs followed, but more ‘meh’ drifted lower – ‘yeah that was the top’ – with only a small Nov Straddle seller showing any aggression to get out.

From the highs, IV has fallen back 3-4% (1month proxy), just chilling in the mid-ranges.

Long-term progress for Spot ETF, no cigar.

View Twitter thread.

AUTHOR(S)

Tony Stewart

ex-MS Head of Trading desk /BTC Vol. Prop trading /Option Market forensics/ Alter Ego account Digital Asset arena. Tweets are my opinion, not financial advice.

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Option Flow: BTC ETF And Halving Narrative

https://insights.deribit.com/option-flows/option-flow-btc-etf-and-halving-narrative/

In this week’s edition of Option Flows, Tony Stewart is commenting on the market movement from the front to the back end of the curve.

September 21

DSOB action dominates again.

The Long Sep 25.5k Calls TP’d for another $500k, Spot BTC 27150.

Then from the front to back end of the curve where we saw an aggressive buyer of June 2024 65k+85k Calls x2k, the most simplistic explanation being BTC Spot ETF + halving narrative.

2) We highlighted the Sep 25.5k buyer in a previous piece, having bought the Calls when BTC Spot was 25.5k, taking profit at 26.5, re-entering at 26.3 and finally exiting at 27.15k.
With Spot 26.8 as I write this; another great ‘Call’.

MMs happy to take on Gamma with RV decent.

3) Biggest talking point are June 2024 upside Calls.

While not huge in size, just 2k total Jun65k+85k Calls, the effective market-order clips into the DSOB lifted the Strikes ~10% from low-to-high, which was perhaps unnecessary; at one point IV retraced 5%.

This lifted Dec+Mar.

4) Speculation could be that this is Spot BTC ETF + Halving related, and that makes the most sense due to the Expiry and high Strikes, but performance can be attained from several methodologies such as convexity and other path dependencies.

Long-term Call-Skew naturally firmed.

5) Despite the buyer of ETH Dec Call Vega in the last published thread, ETH IV has languished.

Now, due to this BTC June Call buyer, and not a deal of mid-term selling (which has been the MM choice to cover) BTC Dvol trades 5% over ETH Dvol (42/37), having just bounced from -7%.

View Twitter thread.

AUTHOR(S)

Tony Stewart

ex-MS Head of Trading desk /BTC Vol. Prop trading /Option Market forensics/ Alter Ego account Digital Asset arena. Tweets are my opinion, not financial advice.

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The post Option Flow: BTC ETF And Halving Narrative appeared first on Deribit Insights.

Option Flow: Scrambling For Gamma

https://insights.deribit.com/option-flows/option-flow-scrambling-for-gamma/

In this week’s edition of Option Flows, Tony Stewart is commenting on the market movements, and what to expect with the upcoming CPI.

September 13

Reminder of how Vol markets are supposed to act with Spot markets moving and Implied Vol responding.

Continued buyers from fast money accounts, buying Sep Puts on breaks and Sep Calls on rallies.

Some may be MM scrambling for Gamma as the Oct Call buyer adds OTMs.

CPI next.

2) Last week’s buyer of OTM Oct 28-32k Calls has continued, but aimed higher at 31-33k Calls, less size than last week, but squeezed MMs shorts as BTC round-tripped 2.5k points around 26k level.

That’s Short-Gamma pain, and furthermore, front-month expiries have squeezed higher.

3) Adding to that, US CPI to be released within the hour has created some long Option punts, and forced short-covering of Gamma by MMs.

Looked at closely by the FED, this data is rarely material enough to make a decisive change in policy, but the market attaches a move (threat).

4) In sympathy, the rest of the term-structure has risen, despite far less Option demand.

Given this area in Nov/Dec/Mar expiries is where LPs are long from the OWE (Over-Write-Entity) we await if this move is sustained should MMs get back their short-gamma and relax again.

View Twitter thread.

AUTHOR(S)

Tony Stewart

ex-MS Head of Trading desk /BTC Vol. Prop trading /Option Market forensics/ Alter Ego account Digital Asset arena. Tweets are my opinion, not financial advice.

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Option Flow: The Over-Write-Entity

https://insights.deribit.com/option-flows/option-flow-the-over-write-entity/

In this week’s edition of Option Flows, Tony Stewart is commenting on the latest market news, and movements on the Crypto market.

September 7

The first ETH Spot ETF application landed just as funding turned negative and 25k/1.6k were about to be tested.
The Over-Write-Entity [OWE] had been trying to cover his Oct 2.1k Call and barely had time to flinch before Spot Pumped+dumped.
OWE Strategy+Upside more interesting.

2) As a reminder, OWE sells upside Calls ~2months+ maturities, so far has been fruitful, then buys the short-leg back and sells another further month with more premium.

ETH size dominates flow, on BTC it applies constant pressure on Implied Vol.
Hence familiar IV path this year.

3) On BTC, where there have been sizable opposing flows to buy Dec+ maturity Calls+Call spreads to play for a BTC Spot Approval, the OWE strategy (which is evident in its impact on IV in a low RV environment) is masked in its impact on net upside positioning.

@genesisvol data:

4) Compare this picture to the same on ETH net positioning.

@genesisvol data:

5) OWE wants to buy his short Oct 2.1k Call leg in order to sell further out Call premium, not because he is concerned about a rally.

And yet now that the first ETH Spot ETF has been applied for, and if BTC get approved, ETH likely follows, this strategy may be more considered.

6) The impact has not just been applied to IV but also to Call Skew which trades negative to Puts (25delta).

At some point, perhaps when BTC approval becomes more likely and timely, there could well be a greater demand for ETH upside.

We also saw how OWE reacted post XRP news.

7) This week, however, OWE reacted calmly: sat on the DSOB bid on his Oct 2.1k Calls, and didn’t panic raise bids.

To the bull’s disappointment, ETH acted like a P&D coin, retracing a sharp initial rally with very little time to react thoughtfully. A Gamma squeeze was dismissed.

8) On BTC, a DSOB Dec 22+23k Put seller gave ammo to Gamma+Vega shorts concerned about the downside, and for those that delta hedged, the reward was instant as Spot bounced and Vol ticked up.

While there’s a notable lack of follow-through on heavy narratives, Dvol has plateaued.

View Twitter thread.

AUTHOR(S)

Tony Stewart

ex-MS Head of Trading desk /BTC Vol. Prop trading /Option Market forensics/ Alter Ego account Digital Asset arena. Tweets are my opinion, not financial advice.


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Option Flow: Everything Changed

https://insights.deribit.com/option-flows/option-flow-everything-changed/

In this week’s edition of Option Flows, Tony Stewart is commenting on the sudden change of the market caused by the latest Grayscale vs SEC news.

August 30

The last report was filled with mixed flow signals.

Buyers Sep1 out to Nov, Dec, & Jun ATM Calls outweighing conspicuous hedging+downside plays.

The downside plays accumulated and more Calls were offered on DSOB for yield.

Then the Grayscale-SEC news and everything changed.

2) A subtle but large covering of ETH 2k Calls over the last few days has been the only trade of note prior to yesterday, but it became significant.

Otherwise, market sentiment was feeling bereft of energy, with Put spread(+collars), downside Puts on BTC accumulated, Calls sold.

3) Release of the Grayscale victory vs SEC news powerfully polarized flow to the upside.

1k of Oct 28k+Nov 30k Calls offered in the order book at that moment got snapped up at ~40vol before the offers could pull as Spot surged.

An unfilled bid on 1k Gamma Calls was left behind.

4) Scrambling for Gamma on ETH Sep 1.9+2k Calls to cover what MMs had sold, and Fast money buying of Sep-Oct 28-31k Calls (+spreads), with a Fund following up buying Gamma in the Sep28+29k Calls, led to a near-date pump in IV while Spot rallied to 28150.

5) Initially 60-120dte IV followed (but lagged) the Gamma buying, as actual demand was fully focussed in the <60dte maturities.
At most Dec strike vol, as a proxy, was no more than 3vols higher on the day.

Spot having retraced & momentum purged, 30dte+ IV has fallen <yesterdays.

View Twitter thread.

AUTHOR(S)

Tony Stewart

ex-MS Head of Trading desk /BTC Vol. Prop trading /Option Market forensics/ Alter Ego account Digital Asset arena. Tweets are my opinion, not financial advice.


RECENT ARTICLES

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Option Flow: Fast Money Accumulation

https://insights.deribit.com/option-flows/option-flow-fast-money-accumulation/

In this week’s edition of Option Flows, Tony Stewart is commenting on aligned flows in BTC and ETH, and the upcoming ETF decision day.

August 9

Aligned flows in BTC+ETH with fast money accumulation of near-date Aug+Sep Calls Block+DSOB.

ETF delay/approval and Financial Crypto scrutiny headlines buoying both BTC+ETH.

Likely TWAP BTC Spot buyer, and dislike to sell BTC Gamma vs ETH resulting in relative BTC Dvol pump.

2) With BTC Aug 29-32k Calls bought 2k+, dragging up Sep+Oct IV forcing Dvol >40% and BTC Spot+basis firming, while ETH Dvol languishes unmoved at 34% hints at a BTC-centric buyer.

One can’t help but think of MicroStrategy, whether executing or the anticipation of that purchase.

3) With Funds already positioned for ETF approval with Oct-March Calls (+spreads), the IV move in the last couple of days is much more fast-money related.

There has been little follow-through in Dec+further maturities, which in fact has observed copycat Call Yield DSOB sellers.

4) Of course, we have observed these short-term plays before (if this is indeed MSTR related).

The anticipation can often be more than the reality and buyers need to be very right with such a large IV>RV premium, for their Options to pay off sufficiently for the risk-reward.

View Twitter thread.

AUTHOR(S)

Tony Stewart

ex-MS Head of Trading desk /BTC Vol. Prop trading /Option Market forensics/ Alter Ego account Digital Asset arena. Tweets are my opinion, not financial advice.


RECENT ARTICLES

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Option Flow: Low Vol

https://insights.deribit.com/option-flows/option-flow-low-vol/

In this week’s edition of Option Flows, Tony Stewart is commenting on the low Vol, selling of Call Skew, and the Spot ETF decision.

July 26

The sun rarely shines on Vol during summer.
Dvol (BTC+ETH) at 38% year lows.
Block activity reduced.
Elevated Call Skew sold on DSOB to exit or yield.
Security-related excitement contained.
Spot ETF decision/delay mid-Aug awaited.
FOMC today 0.25 expected, Pow wording unknown.

2) BTC flows uninspiring this week; an IV drift as 7day RV fails to excite. Sep+Dec+Mar upside Call flow predicts an ETF Spot approval but currently bleeds.

ETH follows a similar path lower but flows engaged.
30k Sep 2.1+2.2k Calls sold on DSOB.
20k Mar 1.9-2.8k Call spread bot.

3) A nudge at the front of the curve ahead of FOMC and Powell guidance.

But otherwise, the term structure in perfect contango, with no Aug/Sep bump indicating an ETF Vol play.

Plays exist via upside Calls+Spreads but are counterweighted by sellers due to VRP (7d 10%, 30d 3%).

View Twitter thread.

AUTHOR(S)

Tony Stewart

ex-MS Head of Trading desk /BTC Vol. Prop trading /Option Market forensics/ Alter Ego account Digital Asset arena. Tweets are my opinion, not financial advice.


RECENT ARTICLES

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Option Flow: Macro Week

https://insights.deribit.com/option-flows/option-flow-macro-week/

In this week’s edition of Option Flows, Tony Stewart is commenting on this weeks Macro and Crypto Regulation Events.

June 13

Sales in targetted Alts triggered a Spot sell-off in ETH and some firming in Gamma at the weekend.

Then Call buyers bought up Deltas, noticeably Sep1.9k x11k, Sep2.1k x6k, and on BTC short-dated 14-16th +23Jun 26k Calls x2.5k on DSOB.

Big week Macro+Crypto Regulatory ahead.

2) The Option buying ahead of a Macro week including headliners CPI+FOMC, and Crypto SEC v CB response and Binance TRO was to be expected and with IVs historically low a cheap alternative to D1.

Refreshing to see actual (though limited) buyer of not just Gamma, but ETH Sep Vega.

3) In BTC, the drive for IV rising has been more Gamma-focussed, with fronts active even pre-wknd as 16th Jun ATM Strangle traded firm 2way, and a buyer of Jun29k Gamma.

Then Jun26k Call buyer on DSOB bidding the fronts higher.
Vega sympathetically follows with only sparse buys.

4) IV now trades at a premium to RV, and the usual reaction as data/info gets released is to soften as uncertainty fizzles.

More interesting than normal is that there is not just Macro but a fair amount of Crypto-specific legal/regulatory info which may or may not clear the air.

AUTHOR(S)

Tony Stewart

ex-MS Head of Trading desk /BTC Vol. Prop trading /Option Market forensics/ Alter Ego account Digital Asset arena. Tweets are my opinion, not financial advice.


RECENT ARTICLES

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Option Flow: Fast Money

https://insights.deribit.com/option-flows/option-flow-fast-money/

In this week’s edition of Option Flows, Tony Stewart is commenting on BTC still trading within a narrow range with some brief volatility.

May 15

After briefly falling below the hard deck, BTC has been quick to recover to 27.3k, and now sitting just above the Call buyers have returned hoping the level will hold and push upward. Fast Money so far, Gamma Call buyers May 18-26th 28+29k Calls, 28-30k Call spreads, net 2.5k+.

2) This morning’s Call buying, be it very near-dated, has pushed 7-14day IV higher after the weekend lull and pressure from last week.

The 27.3k BTC level is pivotal. Tested a couple times now, a good push-up may compound confidence.
And Vice-Versa ofc; NB Put buying is limited.

3) Net positioning still appears bullish.

The ‘fake’ Govt selling wallet having dashed hopes temporarily and bulls looking for momentum to rebuild.

A buyer of Jun 31-35k Call spreads x2k at the weekend may well have been covering a recent Jun 32-35k Call spread sale just prior.

View Twitter thread.

AUTHOR(S)

Tony Stewart Tony Stewart

ex-MS Head of Trading desk /BTC Vol. Prop trading /Option Market forensics/ Alter Ego account Digital Asset arena. Tweets are my opinion, not financial advice.


RECENT ARTICLES

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Option Flow: ‘Sell in May’

https://insights.deribit.com/option-flows/option-flow-sell-in-may/

In this week’s edition of Option Flows, Tony Stewart is commenting on BTC’s $30k wall, and the ETH Foundation selling.

May 8

BTC Call(+spread) buyers can’t catch a break as 30k wall insurmountable, ‘Sell in May..’ resonates, and ETH foundation sells $30m.

Buyer May19 29.5k Calls x1.5k, Jun30k Calls x1k, TP Jun ITM Calls to 2x not. Jun+Sep ATM C (+sp).

Adverse ETH, sales Sep+Dec Calls, Jun Put bot.

2) BTC Call buying continues to be spot correlated and as such Skew, firming as Calls bot on rallies. FOMO on 30k breach.

But lack of material increase in RV results in plentiful supply and stable IV.

Not all Call (+structures) may be bullish though; simultaneous D1 selling.

3) The record of ETH foundation sales compelled large unwinds/D1 selling, and in the Option space the directional plays followed.

Sales of net 25k Sep2.6k+Dec3k Calls further added pressure to ETH IV, DVol still in-line with BTC.

And today, a buy of ETH1.9k Puts x15k observed.

4) Without a break of 27k/31k Spot, or a material IV-induced Option flow trade that would suck supply, perhaps on the expectation of a large move, IV continues to drift lower.

Small sudden variations in the sub-10d maturities reflect more retail-based +fast money demand/supply.

View Twitter thread.

AUTHOR(S)

Tony Stewart Tony Stewart

ex-MS Head of Trading desk /BTC Vol. Prop trading /Option Market forensics/ Alter Ego account Digital Asset arena. Tweets are my opinion, not financial advice.


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Option Flow: Conspicuous Volatility

https://insights.deribit.com/option-flows/option-flow-conspicuous-volatility/

In this week’s edition of Option Flows, Tony Stewart is commenting on the latest market movement including the latest D1 volatility.

April 27

Conspicuous huge D1 volatility but disproportionate Options activity. Large Funds forced to deal with former as a priority.

Initially, Apr+May 30-32k Calls bot on the rally.
Then nr 30k, Put Skew bought via Jun 27-33 RR.

Later alerts, D1 Fund sells+liqs.
RV>IV.
Missed opps.

2) While the European session was sane, the US session became deranged as alert rumors circulated of US govt selling compounding an active seller into accelerating liqs.

With Spot ranging >>10%, IV should have surged, but very little Options flow created only a feeble response.

3)

Only sub-2week expiries reacted measurably as retail adjusted and MMs dealt with Apr28 Strike risk.
Barely anything traded >1month expiry, given the large underlying move.

Huge opportunities were missed to accumulate Gamma for the day as Spot 29k-30k-27k-29k with BTC vol <55%.

View Twitter thread.

AUTHOR(S)

Tony Stewart Tony Stewart

ex-MS Head of Trading desk /BTC Vol. Prop trading /Option Market forensics/ Alter Ego account Digital Asset arena. Tweets are my opinion, not financial advice.


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Option Flow: ETH Unlock

https://insights.deribit.com/option-flows/option-flow-eth-unlock/

In this week’s edition of Option Flows, Tony Stewart is commenting on the market movements after days with CPI, FED Minutes, and ETH Unlock.

April 13

T-1 days pre-CPI/FEDminutes/ETHunlock, large derisking BTC via Apr28 28-34 RR bot Put x1k, May 30-40k Call Spread sold 1.5k, Jun29k Calls sold, Apr25k Puts bot, but opposing (but smaller) buying of ETH Calls.

T=0, Fund+MM dumping Vol pre-events in May-Sep.

T+1 day, Add-risk?

2) While Spot tested 30.5k again, large sellers of Spot dumped into buying, and unwinds of Risk + Hedging AUM was employed pre-event uncertainty.

Further exit of Vol, but with some Wing Convexity added was the big picture.

3) Meanwhile in ETH, IV also suffered from CPI non-event, but Option flows were more constructive, some to Hedge, but more to buy upside ATM+OTM Call zones.

4) ETH/BTC DVOL bouncing from lows on the back of this, but still low (6% ETH>BTC) in absolute values due to the recent BTC outperformance.

The question now is which has a more impactful narrative.

5) Another question to ask now, is that with CPI+FED minutes benign, and ETH transition without incident, will we see the risk via Spot + Calls (at this lower IV) added back.

BTC 30.5 and ETH 2k are within touching distance.

View Twitter thread.

AUTHOR(S)

Tony Stewart Tony Stewart

ex-MS Head of Trading desk /BTC Vol. Prop trading /Option Market forensics/ Alter Ego account Digital Asset arena. Tweets are my opinion, not financial advice.


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Option Flow: Spot Buying Spree

https://insights.deribit.com/option-flows/option-flow-spot-buying-spree/

In this week’s edition of Option Flows, Tony Stewart is commenting on the market movements after a quiet Easter.

April 11

An anticipated quiet Easter Monday resurrected into a buying spree on Spot + Calls, as the 28k magnet lost attraction and the wall of resistance finally fell.

Apr14 29-30k Calls bought 2k on DSOB, May 38k Calls blocked 1.5k+, Apr28 31-34 May 40k+ Call spreads x2.5k+

BTC 30k.

2) While those who awoke early got to cover shorts and go long while IV was still suffering from its long weekend lull, most of the Spot+ Call(+spread) buying came in US hours.

3) With IV trading at a decent premium to 7-day RV, sellers of Options were at first engaged, but once it became clear the one-sided flows and Spot moves were dominating, MMs struggled to cover and IV rose sharply.

4) Interesting dynamics as the (Term) Call spreads which have been employed over the last year to access Gamma by funding with a higher Call eg Apr28 32k Calls bot, funded by selling the May42k Calls – selling far upside convexity – was matched by a large buyer of May 38k Calls.

5) The move from 29.5k to 30k and breach was quick as was an expected stop/entry gap up to 30.5k in early APAC hours, but CT talk of extreme Gamma moves above did not unfold.

European hours have allowed some MM covering of short options as IV drifts a couple vols from the highs.

View Twitter thread.

AUTHOR(S)

Tony Stewart Tony Stewart

ex-MS Head of Trading desk /BTC Vol. Prop trading /Option Market forensics/ Alter Ego account Digital Asset arena. Tweets are my opinion, not financial advice.


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