Options Landscape Cleaner After September’s Shakeout

Macro: Positioning Resets After September Washout

Bitcoin has held firm above $112k and Ethereum reclaimed $4.1k despite heavy ETF outflows into quarter-end. That resilience suggests institutional appetite remains intact heading into “Uptober,” a seasonally bullish month.

Macro conditions still matter: U.S. growth looks solid, the labour market isn’t collapsing, the dollar is stronger, and liquidity is tighter – all tempering hopes for imminent Fed cuts. Still, leverage has been flushed out after $4B in liquidations, leaving cleaner positioning and a potential upside window.

Meanwhile, Tether’s reported $15–20B raise and expansion into AI, energy, and neurotech shows crypto’s structural growth story remains alive beyond short-term price action.

Realized Volatility: Carry Trade Squeezed

Volatility picked up around last week’s expiry, but outside of Thursday’s drop, realized moves stayed inside implied ranges;

• BTC front-end vols held steady, while ETH vols dropped about 5 points.
• Carry has compressed to ~5 points, limiting returns for gamma sellers.
• With BTC implied vol near 30 and daily breakevens around 1.5%, there’s little room for further vol compression.

Term Structure: Skews Flatten, ETH Upside Favoured

Both BTC and ETH skew curves flattened after the weekend rally;

• BTC front-end puts now trade at just a 2 vol premium (down from ~6).
• ETH skew is broadly stable, with the back-end showing a steady 2 vol call premium. Takeaway: short-dated skew still tracks spot, but back-end skew is sending a consistent signal—ETH upside is favoured into late 2025.

ETH/BTC Dynamics: Wide Vol Spread Persists

ETH/BTC bounced from 0.035 back to its trendline, but options still price a high relative risk in ETH;

• Vol spreads remain wide: ~25 in the front end and ~20 in the back.
• The market remains reluctant to be short ETH gamma after the explosive summer rally. Until institutional adoption deepens and more overwriting emerges, these elevated spreads are likely to stick.
• SOL vol, meanwhile, collapsed from 100 to 70, now looking cheap versus ETH. The options market is effectively saying both assets carry similar upside potential.

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