In this week’s edition of Option Flows, Tony Stewart is commenting on the latest market movements.
March 21
After the most aggressive outright Block buying of March BTC Calls +Gamma we’ve seen in a while pre-weekend, Spot continues to challenge resistance and strategies have turned to Apr+May Call spreads using the higher leg (35-40k) to fund buying 31/32k Call zones. ETH RV+IV lag.
2) Mar24+Mar31 28-30k Calls lifted in large Blocks pre-weekend in low liquidity sessions ahead of certain uncertainty, faced by MMs unkeen to sell mid-60% IV Gamma, therefore, priced wild offers promptly accepted.
Delta+Cover demand Hedges spiked 14d IV 10%.
Wknd Gamma Impact.
3) With Spot settling in the 27-28.5k range, the 7-14 day Vol-of-Vol has been choppy with each sense of range-bound comfort softening IV only to bounce as break-out FOMO + Gamma impacts to the upside.
The outright Call buying strategy has efficiently moved to Call spread buying.
4) At elevated IV Call spreads limit Theta+Vega.
So Funds have utilized this strategy for exposure:
May 32-36k x2k
Apr7 28-33k x2k
Apr7 33-38k x1k
Apr7 31- Apr28 40k x1
Rolling of ITM to OTM also, eg Jun26-27k into May 31-33k Calls x1.5k
Call Skew continues to react to demand.
5) Interestingly, Net positioning from Jan1 ’23 is not as clear-cut as many might imagine.
The 26-27k Area is a combination of Long Calls outstanding, but also recent Put hedges.
30+34k Strikes remain Big Shorts.
Unclear how much of this is offset/part of 25-28k Call Strikes.
View Twitter thread.
AUTHOR(S)
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.