This weeks Option Flows with Tony Stewart starts with commentary of a spike in volume and a new 24h record high volume on Deribit.

July 28

BTC 11k. Vol spikes as Deribit sets 24hr volume record. 1w IV hits 90%+. Call:Puts 2:1. Call skew increases. Upside demand, as shorts are forced to cover and longs roll profits to higher strikes. Put hedging limited, seeing more put sellers attain upside exposure. Open Int up.

2 / Recall large fund Call buyers July31 11-13k over last few weeks, market makers short, but vs long 9.5-10k area, so the initial IV move reaction was slow until 10.5-11k breached and new territory set. At this point, IV surged at the front end as MMs moved towards their shorts.

3 / MMs took active advantage of some profit-takers in July31st 11k Calls which traded 3k, OI dropped 1k, managing risk. But 2k 14k Calls were bought keeping explosive upside hopes alive.

As July31 expiry implied vol surged (with >60k open interest), 1-3month followed more calmly.

4 / Covered Call (CC) strategies tested. Recent low IV environment has resulted in Calls being sold at much lower risky strikes than hoped to attain yield. Spot blew through most of these. Some CC funds fiat-based, so shorts not covered, some Sats focus, so shorts hastily managed.

5 / An associated example was Sep11k Calls short-covered and rolled ‘up and out’ (ie strike up, maturity longer) to Mar 14-16k Calls. With pressure already applied to Mar with decent clip sellers of Mar 7k Puts earlier to get upside exposure, Mar21 IV was briefly down on the day!

End / With BTC Spot exiting a low vol environment, a psychological hangover is evident, as IV has fallen early European hours.

RV 10d 69%, 1m 44%, 3m 61%
IV 10d 67%, 1m 68%, 3m 68%

Longs weathered misery to profit yesterday. Rewards reaped.

Static mkt ahead? Adapt to environment.

Original thread on Twitter can be seen here.

July 30

$BTC 11k gravitational pull.

With July31 11k Calls Open interest at 4.5k (Puts OI 1k) and Implied Vol 50%, longs have a short 24hour window to hope for escape velocity.

With RV settling, IVs across the term structure falling, now low-60% (3% a day), with Call skew upside bias.

2 / 11k Call shorts been tested two-fold, on either to force cover or be worried about upside surges. The high OI suggests sizable cojones or offsetting hedges and therefore a large amount of shorts now won’t cover. This leaves frustrated longs (11k a popular upside play + hedge).

3 / There is the potential for option-related moves near+post expiry with not only a large unresolved 11k strike, but more significantly >8000 ITM Calls OI contained within the 9k-10.5k strikes. Similar ETH. Some will expire to ‘cash’, some will have Spot/perp/futures to unravel.

4 / July31 exp aside, new option flows, generally from the sale side are expected post expiry and with RV not following through, IV has drifted from the mid-70s to low 60% in 1-3m tenors. Lack of strong demand and decent supply from near/ATM put sellers applying IV+skew pressure.

5 / This fairly recent near/ATM put selling, positive underlying exposure bias, of course, is particularly powerful with high implied vol and when diligently managed. It was a strategy employed frequently pre-march crash, and naturally waned somewhat in the subsequent months.

End / Only today, low volume, has net initiating Put interest flipped to buy (Aug 8.5k-9k ~x1k). Not enough to influence skew which continues dominated by upside interest — Covered Call seller flow wounded (should return post monthly exp.) and Calls expected to outperform on surges..

Original thread on Twitter can be seen here.

August 1

Post monthly expiry, break-away Asian hours to 11.8k BTC, 360ETH. Implied Vols orderly (2m 60% — expectation of 3% a day move, 10d RV 70%. ETH 75% — 3.75% a day, 10d RV 90%). Buyers for near-term Calls (12-15k), also crash protection puts (<9k). Near-ATM Put selling continues.

2 / More evidence of short-Calls moved to higher strikes or outright forced buyback of previously OTM Calls, now ITM — 7th Aug 11k Calls aggressively bought yesterday. Even with covered Calls, once strike close, the original intention to lock USD is challenged for retaining Sats.

3 / Continued near-ATM Put selling is maintaining a supply of options, feeding Call + Vol-fund buyers, and keeping implied vols orderly. This Put flow, in its most natural interpretation, is confident of higher spot lows, so far playing out. Impact is to lower relative Put skew.

End / Have seen <1month 25% OTM crash protection, which could be punts/pullback or borrow hedging. But the market has not seen large (often longer-dated) put/collar trades of any significance. IV+Skew is beneficial (Puts low vs Calls), so assumption upside spot targets not reached.

Original thread on Twitter can be seen here.

August 2

BTC wick (12.1-10.5), ETH (415-325) were too sudden for strategic option trades. There were some ‘unintended’ prints (Aug28 14k Calls printed nr 200%). IVs have quickly settled back to 70% (only a couple % points up from pre-wick), ETH 110%. Sunday volumes low + now hesitant.

Original thread on Twitter can be seen here.



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