This weeks Option Flows with Tony Stewart starts with commentary of BTC first followed S&P higher, on vaccine news, then sold off with Gold later, concluding US business day with some independence.

November 9

BTC first followed S&P higher, on vaccine news, then sold off with Gold later, concluding US business day with some independence.

Pre-vaccine news Nov16k+ Calls were accumulated, but EoD, insto mood flipped. Nov13,20,27 ATM 15-16.5k Calls unwound x1.5k+, Nov27 15p bought x500.

2 / Last week saw natural behaviour by Funds long ITM Calls, taking profits and some rolled up Calls to maintain some exposure.
Today, the first time we’ve seen material unwinding of ATM Calls, the options that define real exposure/spot replacement.
Note troughs where Calls sold.

End / While the market often sees OTM Puts being bought, often speculative or hedge, the ATM Nov27 15p bought today and some 14+14.5k ATM at the end of last week is different.
Skew firming for the Puts, OTM remain bid + Calls have found a level.
Option market indicating mild change.

Original thread on Twitter can be seen here.

November 11

BTC option flow indicating short-term bullish bias but with bounded upside.
13th Nov 15.75-16k Calls bought 1k+ alongside spot buying from 15.3k. Nov20+27 15k Puts sold and Nov20+27 ATM Put-15d Call strangles sold, bounded at 17/18k. Nov crash ‘teeny’ OTM Puts 11-13.5k bought.

2 / Rare to see such tight strangles being sold – Nov20 15.5-17k and Nov27 15-18k, and rarer still that the Put leg is so close to ATM. Data unclear to definitively say whether risk unwind or opening, probability suggests former.
Either way, Nov implied vols get drilled; <50% ATM.

End / Some other Nov expiry ATM (14-15.25k) Puts seen sold, some unwound, as confidence returns with equities + gold bouncing off lows and concerns over vaccine vs stimulus recede for the moment.
However, Nov crash protection Puts and short-covering of OTM Puts keeps <10d skew firm.

Original thread on Twitter can be seen here.

November 13

Option buying (short cover, new exposure, hedging): Dec 18-20k Calls x1k+, Nov15p x1k, Nov13 expiry 16-16.5k Calls x2k all contribute to IVs squeezing as BTC rallies to 16.5k. Nov27 ATM hits 64% early Asian time, but as BTC retraces, buyers dwindle, Call sellers crush IV <50%.

2 / From previous posts, you will have picked up that >~80% of the time, implied options, the cost of options, increases as spot breaks unfamiliar territory. (Under)Exposed tend to act first, so implied vols firm. Most longs particularly when (recent) highs challenged, get greedy.

3 / But ‘Greed works’ – at least during this rally from 10k.

However, Longs are enduring psychological warfare.
10d RV is 76%, 10d IV is ~50%.
In this environment vol cheap, but the long options trade (naked + vol) is crowded, so each spot pause brings non-vol sensitive sellers.

4 / Naked long Call holders don’t care if Vol is 50% or 70%, they care that their Calls had 5x, now on the retrace they are 4x, the weekend is ahead, they have option decay and they want to lock in profits.
Call writers pretty apathetic, although IV denotes which Calls they yield.

End / Nov27 16-18k Calls have been hit most this morning. And gamma via daily options is trading at 40% (a 2% daily move). The reaction in vol indicates that most vol funds are long gamma and vol and able to hedge this against RV 25%>IV. What they crave most is an upside blowout.

Original thread on Twitter can be seen here.

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