SignalPlus Volatility Column (20230803): Implied Volatility Declines, Traders Continue Medium to Long-term Positioning
According to the United States financial news media Semafor citing informed sources, officials from the United States Department of Justice are considering bringing fraud charges against Binance. However, they are concerned that this move could lead to a run on the platform similar to the now-bankrupt FTX, resulting in consumer loss of funds and potentially causing panic in the cryptocurrency market. The sources said that prosecutors are considering other options, such as fines, deferred prosecution, or non-prosecution agreements. Such a result would be a compromise, holding Binance accountable for alleged wrongdoing while minimizing harm to consumers. In response, Binance founder Changpeng Zhao only posted a "4" on Twitter, warning users to "ignore FUD, fake news, attacks, etc."
As a result of this event, BTC has dropped about $600 in the short term today, falling below $29,000. Implied volatility has fallen overall, giving back most of yesterday's gains. Market trading distribution has shifted to the medium and long term, with investors adopting more long-term investment strategies in the past 24 hours. A trade for 762.5 BTC of 29 DEC 23 28000/35000 Short Strangle has reduced the volatility for that period to 41.78% (-0.88%), reaching a new low in the past year. At the same time, some traders have chosen to continue accumulating positions on dips, opening 1100 contracts of 29 DEC 23-36000-C call options.
Regarding ETH, the implied volatility has also been on a downward trend overall. However, due to potential risks associated with the CRV event, the front-end IV has shown an upward trend in the term structure. In fact, it may be these concerns that have led to a significant decline in bullish sentiment in the ETH market. In bulk trades, we can not only see a naked selling strategy for 30,000 ETH with the 27 OCT 23-2100-C option, but also a Short Call Spread for the 29 SEP 23 1900 vs 2000 options, as well as a Diagonal Call Spread selling the 25 AUG 23-1950-C option and buying the 27 OCT 23-2100-C option as protection. All of these indicate that traders lack confidence in ETH's price increasing in the next three months.
Source: Deribit (as of 16:00 UTC+8)
Source: SignalPlus
Source: Laevitas, the distribution of trades shifting towards the medium to long term
Source: Deribit Block Trade
Source: Deribit Block Trade
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