In this week’s edition of Option Flows, Tony Stewart is commenting on a wick from Elon Musk, MSTR conference and bullish moves.

February 2

Sentiment captured within the BTC 40k Calls.

‘Elon reversal wick’ suggested 40k a safe sell and with BTC ranging~33.5k +continued ETH+Defi migration, a prolonged+keen x50 clips seller hit Feb26 40k strike hard.
At the same time, a Fund bought x500.
Ahead, the MSTR conference.

2) Seller of Feb26 40k Calls took IV from 111% to 105%.
Demand was less aggressive with MMs already saturated with Feb12 40k Calls and BTC spot ranging +10day RV falling.

But BTC rally >35k today has brought out Vol buyers and firmed the strike back to 108%.

Contango Structure:

View Twitter thread.

February 5

Hugely bullish Institutional MSTR Bitcoin summit concludes. Regulatory requirements delay immediate reaction for some, but no doubt in readiness+ability to access.

Buyer of Feb26 40k Calls continues.

But IVs drifting lower as OTM Puts+Calls sold; yield+range 32k-40k comfort.

2) Implied Vol Term structure curve <100% for the first time in 2021. RV contained. IV Pressure dominates.

OTM Options are being sold to collect Sats and enhance yield as range comfort returns – be it a wide range at these vol levels; higher lows and lower highs in spot BTC.

3) Inactivity in the Skew picture summarizes a subdued Option market.
Desensitization to Institutional macro accumulation, (efficient execution), and failure to breach 40k again has for the moment taken some heat from upside Calls.
Protection sees less demand. OTM Puts <33k sold.

4) The ETH environment is not dissimilar.
Despite increased Option action stimulated by ATH prices, and Defi engagement, the Options Skew has remained in a relatively tight range, RVs + IVs drifting.
However, the term-structure is at a higher level; volatility can’t be dismissed.

View Twitter thread.


Tony Stewart Tony Stewart

ex-MS Head of Trading desk /BTC Vol. Prop trading /Option Market forensics/ Alter Ego account Digital Asset arena. Tweets are my opinion, not financial advice.