In this week’s edition of Option Flows, Tony Stewart is commenting on the recent market movements.
Trump’s bond-market-crisis fueled tariff-walkback flipped the vocal narrative from aggression to capitulation, and the markets from capitulation to aggressive bounce.
Protective/Bear play BTC 75-78k Puts were dumped, and 85-100k Calls were lifted as BTC surged from 75-85k.
2) This data-picture is clear.
Red dumping of 75-78k Puts, and flipped narrative to buying of 85-100k Strike Calls.
Within the picture there was a fair amount of 2-way business as initially short Calls were covered and continued rotation in the May+June buckets (downside+upside).
3) With Put Skew having been elevated for a period now, the Calls offered decent value into an obvious flip.
Clear buying of 85k-90k Calls in April+May and dumping of 75-78k Puts has moved the Skew back down to flat.
4) When markets started rallying, the immediate response was to dump optionality, as downside plays seemed off the table; DVol proxy fell back from 62% to 52% on BTC.
But S&P VIX held firm, and with RV outperforming IV on BTC, non-insular thinkers bought upside IV; Dvol now 57%.
5) But elevated VIX (still >35%) and Dvol at 57% are representative of expected continued high Realized Vol (up+down).
Within the last few days, Trump’s actions forced a strong bounce as imminent crash fear dissipated.
The market will digest the consequences, and stay responsive.
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ex-MS Head of Trading desk /BTC Vol. Prop trading /Option Market forensics/ Alter Ego account Digital Asset arena. Tweets are my opinion, not financial advice.