This weeks Option Flows with Tony Stewart starts with commentary of July31 8.5-10.5k.

July 1

IVs set year lows, duly trailing a lifeless BTC (10d RV 37%). Some longs have thrown in the towel (retail anguish + fund loss July31 8.5-10.5k strangle x325). While opportunities present: short-covering Sep12k x500+, Aug Call spreads + Jul31 Calls bought. Static-Bullish bias.

2 / Not definitive, but the Sep12k Calls being bought (x450 at 0.042BTC, bidding for 450), are likely those sold on 2nd June at 0.0985 when BTC spot >10k.

Vol similar, steep term, flat call skew, so if correct, pure directional profit-taking move, suggesting cautious of a rally.

3 / The remaining bid is a resting bid at 0.042, so if BTC spot moves lower, vol firms in this strike and the rest of the term structure firms with it.

Rare; more often dynamic flow- July31 10k calls bought earlier x250+ as S&P touched 3100 and BTC looked ready for upside break.

4 /Despite BTC spot barely moving, implied vols have not moved since Friday, suggesting a plateau in vol levels, but not of course taking into account theta decay.
Expect vol pressure with BTC spot >8.9k <9.4k, should firm outside, but requires <8.6k >10-10.5k to materially move.

5 / Puts continue to observe 2way flow. Sep 8k bought x150 earlier today easily finding sellers from recent and continued selling in Aug+Sep 6-7k area, receiving premium and upside exposure.

Call spreads in Aug (CME+Deribit) also showing significant 2-way interest; likely to grow.

End / Skew measures continue to be elevated for 1m 25 delta Puts>Calls, but in reality, this is from ATM-30delta calls being sold previously enhancing yield, not puts size bought. While Calls offer decent value, meaty Puts are not high IV cf ATM and will react strongly on BTC moves.

Original thread on Twitter can be seen here.

July 3

De-Fi distraction, new Vol regime, complacency?

BTC IV write off 4th July long wknd as 2day vol hits 27%, 1w 35%, 1m 45% year low. BTC move <9k negligible Vol reaction.

Flows lean bullish, Aug7k Puts sold x500, 9.5k sold x300, 10k Calls bought x400+. Sep12k Calls completed 1k.

2 / When Vols were high and skew higher, no Put sellers to be found; now with Vols on year lows and Put skew a slight premium, Put sellers (even slightly ITM) feel comfort…and so far vindicated as BTC continues to bounce >9k and Vols fall.

Nevertheless, short-dated risks danger.

3 / On the upside, systematic covered Call strategies come into question as ubiquitous 1m 120% Calls previously yielding 2% now command 0.75% monthly. To retain the same yield requires selling <10k Calls, riskier for stacking Sats. If supply adjusts, this has an impact on demand.

4 / While the front part of the curve is being pummeled on the back of Realised vols and disinterest, the term structure remains steep. Further-out options have less decay and vols too are low percentile, so risk arguably less…unless BTC+ETH have moved into a new low vol regime?

End / Therefore, it is not unexpected to see more 2way interest in these tenors (Aug-Dec 2020). Initiator flows have been recently more from the buy-side for Calls (9.5-12k) and greater from the sell-side for Puts, heavily in the 5-7k range, end-users comfortable BTC unlikely lower.

Original thread on Twitter can be seen here.

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