Option Flow: Fast Money Adds Puts as NFP Disappoints

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

Exhibited last report Fast money getting ahead of this move lower in Spot, buying near-dated Puts.
NFP disappointed – risk off.
BTC and ETH plunged.
Fast money continued to add, some TP+roll down.
Funds back from summer bizarrely muted catching up and/or forced to risk-manage.

2) NFP failed to reassure markets.

Fast money continued to add to Puts buying 1week 49-53k Puts when BTC <55k.

Funds have been absent on downside protection but a well-timed buyer of Sep 55-48k Put spreads, in-and-out Sep 13 54k Puts, and risk-managed 52k Put purchase surfaced.

3) Still, the Fund size OTC trades are all <500lots (not Size) and some were large MM, not even large end-users, which begs the question what/how are the large Funds managing their risk in this cascade?

IVs are still reasonable and the curve is quite flat: opportunities missed?

4) Not surprisingly near-dated Put Skew has continued to firm, and so some 1month+ Put buying was observed taking advantage of flatter mid-term Skew.

Some Fast-money TPd Sep 50-54k Puts near the lows and some rolled down their Puts to 48-49k Strikes increasing <1month Skew more.

5) Interestingly on ETH, which despite underlying shocks has also been absent of proportionally-sized Option flows, the move <2.3k triggered some action (again by Fast money) TPing on 2.2-2.3k Puts and a rare sighting of $2m premium spent on near-dated 2.2-2.7k Calls.
Alts ‘firm’.

6) Despite CT bears calling for 1.5k ETH there’s been little evidence on the Option flows to support this.
Whereas there has been BTC evidence of 40-50k tests via Option flows.

Spot-vol correlation held for a while, but then as is the case at extremes, was tested.
Still orderly.