SignalPlus Volatility Column (2023.07.27): The market is sluggish, but traders remain bullish.
Yesterday's FOMC meeting met market expectations and raised interest rates by 25 basis points. During the Q&A session, Powell did not provide any breakthrough clues to hawks or doves. He emphasized the reliance on data and pointed out that the current policy environment is not suitable for the FOMC to provide a large amount of forward guidance, leaving flexibility for further rate hikes. However, he also reaffirmed the determination to fight inflation and the expectation that there will be no rate cuts this year.
Source: Deribit (as of 16:00 UTC+8)
Clearly, this meeting did not provide the market with the impetus for change. BTC rose slightly for a while, but quickly gave back most of the gains, and the settlement price showed no significant change compared to yesterday. Front-end implied volatility has fallen sharply after the uncertainty subsided, and mid-to-long-term IV also saw a decrease of about 0.8%. Overall, due to the lack of support from actual volatility and expected uncertainty, the IV of BTC/ETH is still unable to escape the downturn, and all maturities have reached close to the lowest point in the past year.
Source: SignalPlus, IV decreased
Source: SignalPlus, the various terms IV close to the lowest point in the past year
As for bulk trading, the market's bullish enthusiasm for BTC in the short term has temporarily faded. In late August, there was a large amount of selling pressure on ATM, including a wide Iron Condor (selling ATM and buying Tail protection) with a ratio of 1:1:3:3, as well as the calendar triangle spread of selling 250 sets of 25 AUG 23-31000-C and buying 29 SEP 23-34000-C. Sellers need to pay attention to the margin rate at this time to avoid double kills caused by price fluctuations + IV rebound on the PM margin. For longer terms, as IV is still at historical lows, traders are still willing to invest in buying. For example, a position of 425 sets of 28 JUL 24-40000-55000 Call Spread.
ETH mainly adopts a bullish buying strategy, with a focus on positions such as 1900-C and 2400-C in the medium term (late August and early September). In December, there are also many large buy Call orders of over 10,000 ETH, such as clearing the original short position with 20,499 contracts of 29 DEC 23-2300-C. Further out, there are also large bulk purchases of 10 K/5 K ETH for 2500-C/2600-C respectively.
Source: Deribit Block Trade
Source: Deribit Block Trade
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