This weeks Option Flows with Tony Stewart starts with commentary of Large buyers of BTC OTM Calls conspicuous with BTC spot rangebound.

July 7

Large buyers of BTC OTM Calls conspicuous with BTC spot rangebound. Calls:Put volume 3:1, bullish bias, Asian hours.
Scattered across short-dated maturities: July10th 9750+10k, July 17th 10.5k+11k, July31 11k+14k, small premium, originator size >2.5k. Vols firm, Call skew bid.

2 / Implied Vols were on year lows, short-term Call skew offered, so these buys take advantage of the cheapest parts of the curve. At this IV, any imminent move in spot higher will outpace theta as Vol firms and essentially becomes Delta+Vol – can profit way before strike price.

3 / But so far, BTC spot has stubbornly refused to play ball. The Calls did appear to be bought on spot breakout momentum – ie bought as the market was rallying >9.2k up to 9.35k, rather than ideal timing on spot lows <9k, so a retrace <9.3k puts them currently at <=break-even.

4 /But the Call buying has made an impact. 1month 25d Skew has moved from Calls -10% to flat, and the Calls bought are <15delta so teeny Call skew has firmed more.

July Implied Vols have firmed 5% and held.
RV 10d 27%, 1m 36%, 3m 62%
Reluctance to sell IV aggressively.
IVs > RVs

5 / Calls also bought in Aug 10-12k range, less size, but higher premium, pushing IVs higher. Sep IV has firmed in sympathy – recall mkt short Sep 12k Calls bought 1k last week. Vols did dip after, but now at the same level.

July Calls technical cheap punt, Aug+Sep bullish play.

6 / Not to be forgotten, the Put side also showed purchases in very near-term OTM Puts – focus July 10 8.5k, July 17th 8k Puts, small premium, 1k+ size traded, the market supplied without any liquidity issue as last week saw large sellers of July 8-8.5k area and Aug-Sep 6-7k Puts.

End / Vols just off year lows, and statistically cheap relative to historical data. But relative to the current realised vol environment, the implied option costs not cheap. These purchases are anticipating movement and recognise that risk-reward. Sellers hope current RV continues.

Original thread on Twitter can be seen here.

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