SignalPlus Volatility Column (2023.07.07): Economic Exceeds Expectations, Volatility Starts to Rise.

SignalPlus

特邀专栏作者

2023-07-07 19:04 (UTC+8)

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Affected by economic data, volatility continues to rise.

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Affected by economic data, volatility continues to rise.

Yesterday's unexpectedly strong "mini non-farm" data release has boosted expectations of further interest rate hikes by the Federal Reserve. The data showed that ADP employment in the United States soared by 497,000 people in June, doubling the expected 225,000 people and marking the largest monthly increase since February last year, far exceeding the previous value of 278,000 people. At the same time, weekly initial jobless claims remained stable, and the number of job cuts by employer challengers also dropped to the lowest level since October last year. After the data was released, spot gold plunged nearly $25, breaking a three-month low; the US dollar index rose rapidly for a short period of time, breaking the two-week high with a high of 103.5771, but later gave up its gains and closed at 103.051 (-0.06%); Dallas Fed President Logan also expressed concerns about whether inflation can cool quickly. To achieve the goal, stricter policies are needed. Yesterday, the most interest rate-sensitive 2-year US bond yield once exceeded 5.1%, and the 10-year yield also recovered from the decline related to SVB, hitting a four-month high and finally closing at 4.03%. The highly anticipated non-farm payroll data will be released tonight at 8:30 PM Beijing time. If the June non-farm data exceeds expectations again, it will be the 15th consecutive time to surprise the market and an unprecedented phenomenon.

The US stock market remained in a downtrend throughout the day, with the Dow Jones/S&P/Nasdaq indices closing down 1.07%/0.79%/0.82% respectively. Along with this, BTC/ETH also experienced a dip, with a slight intraday correction. In the end, BTC closed at 30008 (-2.79%), and ETH fell below the 1900 level to 1856 (-3.58%).

Source: Deribit (as of 16:00)

Source: SignalPlus

There have been no significant fluctuations in implied volatility of options. As of today's settlement, BTC is slightly higher than ETH by 1 ~ 2%, and the implied volatility for BTC/ETH options of the current month is 42.85% (+0.12%) / 41.81% (+1.01%) respectively. For the next month, it is 45.46% (+0.61%) / 44.36% (+0.95%). The macroeconomic indicators of major economies, which are higher than expected, have once again added uncertainty to the overall environment, causing investors to gradually shift their focus to longer-term investment opportunities. Therefore, the entire volatility curve has steepened. While the front end returns to a lower level of three months, the long end begins to show a certain upward trend.

Source: SignalPlus

The market volatility caused by the release of data yesterday has slightly increased the overall trading volume in the options market.

In the BTC market, the emphasis is still on the forward market. A ratio put spread on Wing in September became the largest trade of the day, with a total of 2000 contracts bought for 24000-P and 1000 contracts sold for 27000-P. In addition, bullish strategies for December are still ongoing, with a simultaneous purchase of 250 contracts for 35000-C and 550 contracts for 45000-C on Deribit.

ETH's trades are relatively evenly distributed in terms of expiration dates. The largest trade placed four orders at a ratio of -1 : 2 : -1 under the same strike price of 1900, for a total of 4000 call options with expiration dates on 14 Jul, 21 Jul, and 28 Jul. Additionally, there are scattered strategies focused on bullish volatility, such as Strangle/Straddle, across various medium and long-term expiration dates, which partially explain the slight fluctuation in ETH's volatility surface.