While equities test new depths, BTC is up 60% from Mar13th lows. But in the options market, this rally has not been supported by robust directional call buying; in fact, put buying has dominated.

Evidence of BTC detachment, but in another heavy wave down would BTC be immune?

2 / As stated previously, not all put buying is necessarily bearish.

Use of BTC put options to protect underlying long BTC holdings can offer peace of mind to some, retaining upside exposure, and is a popular technique in developed option markets, particularly in uncertain times.

3 / After last week’s roll of 1000x long Mar27 expiry put options into Jun 3.5k puts, some medium-term put buying has continued in jun 6k and 5k puts. But it is the shorter-term Mar27th expiry that has had the most technical impact.

4 / Continued accumulation of 27/3 5k puts into a liquidity impacted market has increased put skew dramatically. In normal market conditions, might expect ~10vols differential between short-term ATM and 15% OTM put; this is currently 40%+; evidencing demand meeting cautious supply.

5 / Some of this put buying has been premium sensitive (certain dollar amount to spend), but not noticeably vol sensitive: impact has been to push IV higher.

Some puts bought and financed by selling a call: 400x 27/3 5k put bought, financed by selling the 7k call, late Friday 20th

6 / IV firm: 10d 140%, 1m 133%, 3m 118%. Historically high, the current market conditions more than justify these levels.

There is also significant vol of vol at the front end of the curve. Mar27th expiry IV has ranged from 220% to 120%, within the last week and back to 155% now.

End / We undoubtedly live in ‘Interesting times’ and with great uncertainty where personal liquidity and sentiment appear to be fighting every effort made by central banks, these volatility fluctuations could occur for some time.

Original thread on Twitter can be seen here.


Tony Stewart


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