This weeks Option Flows with Tony Stewart starts with commentary of BTC holding pattern, ETH hits high>$1425.

January 19

BTC holding pattern, ETH hits high>$1425.
ETH: Buyers ATM+OTM Call spreads for further upside, but also ATM Put spreads for protection.
BTC: Jan 52K+ Whale Call buyer not recently sighted.
Instead, protective/bearish flow bias: Feb 36 Put Fund bought x~1k, Jan22 35k x~1k.

2 / With ETH Feb IV at 200%, the Option Spreads traded today are structurally more efficient than Outright Options, as they lessen overall cost and vulnerability to high Vega.

With BTC Feb IV drifting back to 130%, Outright Options or Spreads are both reasonable to gain exposure.

End / Conspicuous BTC<25k Strike Crash Puts bought over recent weeks; at >200% IV would perform only in that scenario.

More judicious 32-36k area Puts bought today, opportunistically buying retraced 130% Vol levels and -ve Put skew – the result of wild Call demand.

Skew reverting.

Original thread on Twitter can be seen here.

January 21

While near-dated BTC Put skew has firmed dramatically, inferring cumulative fast money fear of <30k, Paper hedging is largely absent on this leg lower.
In fact, Funds selling the 24k Puts across maturities x1.5k.
Also, sales Feb-Jun 56-72k Calls x1k, setting ‘safe’ boundaries.

2 / Below shows the severe move in 25d Skew.
This is a consequence of:
-Cumulative smaller ‘non-Paper’ buying Jan Puts,
-A move away from extreme OTM Short Calls (Jan52k+)
-Likely over-exposed ‘bull market’ participants.
-Market-Maker concern of possible large dip if 30k breached.

3 / IV dynamic also interesting.
Prior to today, BTC maintained a moderate range, reducing RV, pressuring IV.
However, also a technical reason that hit IV further.
MMs short the Jan OTC Calls to Whale buyer, had to hedge with near-ATMs. As IV+spot fell, MM longer vega; vulnerable.

End / Today’s 10% BTC drop, has only barely firmed IV.
Indeed, as stated earlier, sales of Feb-Dec wings (but with material vega) has steepened the term structure into backwardation.
The relatively orderly BTC move 35k-31k prompted gamma firmness, but vega supply absorbed not bid.

Original thread on Twitter can be seen here.

January 22

Fast-money Jan Put buyers proved astute, as BTC plunged <29k, but then dramatically bounced (now 32.5k), compelling hasty unwinds.
IV spike was rapid and short-lived, reassuring yesterday’s Fund ‘Strangle’ sales.
Jan IV retrace over-extending; one-way scramble to avoid decay.

2 / The resulting maturity curve discounts the near-end, suggesting the Options market is pricing a quiet weekend or predicts further IV drop.
Given that 10day Realized Vol is 125% and the Implied curve <110%, this is bold, but certain elements of downside fear have been resolved.

End / Interestingly, BTC Options volumes were subdued today, despite the large volatility and critical test of <30k.

While fast-money is active, large Fund trades have been limited, perhaps Funds happy to add exposure <30k, and that prior rallies illustrated underperformance angst.

Original thread on Twitter can be seen here.

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