Vol Commentary: Short Dated Vols Spiked

Cumberland is commenting on the recent volatility and potential opportunities to take advantage of it.

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“Anywhere you go, I’ll follow you down Anyplace, but those I know by heart Anywhere you go, I’ll follow you down I’ll follow you down, but not that far”

What we are seeing in the markets

Short dated vols spiked on news of Iran’s attack on Israel, pushing the APR 19 expiry up from 64 all the way up to 80 for BTC. An even bigger move was seen on the ETH side in this ETH led sell-off, pushing vols up from 68 to 88. This pushed the shorter end of the Cumby Ratio (BTC Vol / ETH Vol) down to ~90. However, investors remain mostly bullish in the LT, and continued call buying in the longer-dated expiries has kept DEC vol firm for BTH & ETH at ~79, keeping the Cumby Ratio close to 100 for DEC.

Potential trade idea

The disparity between the short-term bearishness and long term bullishness can be seen most vividly in the in the skew of the risk reversals. For the APR expiry 25D RR, puts are trading over 6 vols over call, while for the DEC expiries, calls are 4 vols over put.

To take advantage of this RV opportunity, you could:

Sell APR 59K Put / Buy APR 68K call & Buy DEC 50K Put / Sell DEC 130K cal

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What we are seeing in the markets

Potential trade idea

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