SignalPlus Volatility Column (20230713): Trading Volume Rebounds, Bulk Trades Continue Long-Term Positioning.
Last night, the US inflation data fell more than expected, with a monthly growth rate of 0.2% for core CPI in June, lower than the expected 0.3%. Even though market expectations have already been lowered, the performance of CPI this time is still weak. The Federal Reserve's Beige Book showed that overall economic activity has grown slightly since late May, with moderate job growth, generally weak banking conditions, and some regions noting a slowdown in price growth. Signs of cooling US inflation have reduced market expectations for a second rate hike. After the data was announced, bond yields fell by 15 basis points on the same day; spot gold rose by more than $20, approaching the $1960 level; the three major US stock indexes all closed higher, with the S&P 500/Nasdaq/DJIA rising by 0.75%/1.1%/0.26% respectively. The S&P and Nasdaq even broke through their closing highs for the past 15 months. As for cryptocurrencies, while they have shown strength in almost all markets, the crypto market alone saw a surge followed by a retreat. One direct reason is that around 10 am Beijing time, the US government transferred 9,825 BTC from three wallets holding "Silk Road" bitcoins, causing some concerns in the market and leading to a decline in prices. Recently, cryptocurrency prices have not shown a clear breakthrough in direction. In fact, as time goes on, the positive expectations brought by TradFi at the macro level have been worn out, and the market is waiting for the next development or new story to lead a breakthrough.
Returning to options, following the release of CPI data, implied volatility of all term options significantly decreased. As of today's settlement, the ATM implied volatility for BTC/ETH at the end of the month decreased to 38.39% (-4.31%) / 35.52% (-4.32%), and for quarterly settlement decreased to 43.90% (-2.92%) and 40.25% (-3.06%). After 16 o'clock, the overall volatility of BTC rebounded slightly, but the overall surface is still steep. The sudden surge in Skew yesterday also returned today, and the current 25-dRR of the two currencies fluctuates near zero, returning to the median level of the past month.
Source: Deribit (as of 16:00)
Source: SignalPlus, significant decrease in implied volatility
Source: SignalPlus, Skew regression
The overall trading volume in the market has seen a significant increase compared to yesterday. Institutional traders continue to establish long positions on BTC futures, with a buy September/sell August calendar RR strategy of 200 BTC notional at the 31000 level. On the other hand, there is a reverse strategy trade on ETH involving the purchase of 2250 ETH on 25th August 23-1900-C and the sale of 29th September 23-1900-C.
The largest trade in December is a 30000 vs 31000 Long Strangle involving 200 BTC, along with a familiar Sega strategy of buying 40000-C and selling Wing 55000-C/25000-P.
Source: Deribit Block Trade
Source: Deribit Block Trade
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