SignalPlus Volatility Column (20230719): Market Trading Languishes, Bulk Trading Positions for Bull Market

特邀专栏作者

2023-07-20 10:33 (UTC+8)

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The trader has already fully priced in a 25 basis point rate hike by the Fed next week, with implied volatility continuing to decline in the front end. The overall trading volume of BTC options has remained stable in the past few days, while ETH continues to be relatively weak. Bulk trading today is

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Yesterday's released retail sales data for June fell short of expectations (MoM + 0.2%, expected 0.5%), but core sales (retail data excluding automobiles, food, and energy) remain strong with a growth of 0.6%, well above the expected 0.3%. After the data was released, traders have already fully priced in a 25 basis point rate hike by the US Federal Reserve next week, and the implied volatility at the front-end has continued to decline, lower than the 25th percentile in the past three months. The IV of ETH even appears to be lower than RV, and the ATM term structure has become steeper, with the Vol Premium further eroded by the data release and next week's FOMC.

Source: Deribit (as of 16:00 UTC+8)

Source: SignalPlus, implied volatility continues to decline

Source: SignalPlus, front-end volatility is significantly lower than the 25th percentile in the past three months

Source: SignalPlus, ETH IV is lower than RV

In these days, the options trading volume of BTC overall remains stable, while ETH is relatively sluggish. The majority of bulk trades today are still dominated by long future positioning. BTC Top Trade executed a set of 40000/50000 Long Call Spread with a leg volume of 500 BTC on 29 DEC 23, and simultaneously sold a matching volume of 29 MAR 24 50000/65000 Call Spread to recoup most of the premium. Similarly, there were a cumulative total of 840 sets of 34000/45000 C/S in December. The trading for ETH mainly concentrated on 29 MAR 24. Top Trade executed two rounds of 1:2 RR, selling a total of 4000 contracts of 1500-P and buying 8000 contracts of 2100-C. These trades involved buying the forward Vol at the end of the year and in the early next year, leaving the market with many visions of a future bull market.

On the other hand, as continuous straddle/strangle positions are being sold off, the mid-range volatility of ETH has dropped to a lower level than the past three months and below the recent RV, attracting some bottom-fishing strategies. They initiated a position of 2000 sets of 4 AUG 23 1850/1950 Long Strangle at the recent low IV price of 34.4%/36.0% to calmly respond to the market uncertainties in the next two weeks and the potential volatility rebound.

Source: Laevitas

Source: Deribit Block Trade

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