This weeks Option Flows with Tony Stewart starts with commentary of BTC+ETH rallying away from danger zones.

September 15

With BTC+ETH spot rallying away from the danger zones (10k/320), option fear metrics have dropped, as users shun downside protection and engage consolidation + upside.

Confident sales of 10k Puts (Oct-Dec), plus wknd exuberance buyer Dec 36k Calls, offset by Call yield sales.

2 / One option participant sees it differently, as I write this, a buyer of 2.5k Sep18 9k puts (+500 9.5k) puts – seen this ‘fund’ before. All done aggressively on-screen, paying from $11 up to $60 (9k strike) to get size done quickly. Also appears to sell cross-term ATM options.

End / Only a few days ago, implied vols were elevated (BTC 1m>65%, ETH>95%) +1m put skew P>C ~10% expressing a real fear of <10k and vs Defi exposure.
Today relief, BTC comfort range 10.5-11.5k

BTC 1m IV 55%, ETH 75%. 1m skew 4%.

BTC 1m RV 55%, ETH 105%.

BTC fair, ETH Eyesvolatile.

Original thread on Twitter can be seen here.

September 17

While some large option players like ‘Red Bull’ (loves OTM Wings) and then the wknd Dec36k Call buyer have blunt execution techniques, there has been what appears to be a large but subtle aggregator of upside BTC Calls, Oct-Dec, 13-20k+ strikes over the last month on Deribit.

2 / Consistent regular small accumulation buys from a fund with a medium-term time horizon. Call skew is +ve ie upside Calls trade above the ATM, which means that these aren’t technically optimum (Call spreads superior – buy upside exposure and take advantage of high upside vols).

3 / Also, 1-3m Implied vols > Realised currently, and the higher Call skew worsens that metric. But medium-term options decay less and pure Calls have unlimited upside. An argument could be made also, that if proved correct, on a rally, implied vols would pump from current levels.

End / On the other side of the trade are Call sellers, not necessarily bearish, but willing to add yield to underlying long spot on rallies and sell premiums which I have intimated are technically elevated at present. Also, vol sellers, MMs, that are happy shorting Cskew + IV vs RV.

Original thread on Twitter can be seen here.

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