SignalPlus Volatility Column (20230904): Market sentiment remains weak as volatility continues to decline.

Last Friday (1 Sep 08:30 pm UTC+8), the released seasonally adjusted non-farm data for August recorded an increase of 187,000, with an unemployment rate of 3.8%, both higher than expected. The growth in hourly wages slowed down, recording 0.2% on a monthly basis, lower than the expected 0.3%, and a decrease of -0.2% compared to the previous value. The release of the data shows that the U.S. labor market is moving towards a better balance, and the possibility of the market pricing in another rate hike by the Federal Reserve this year is low. However, despite this data report to some extent confirming a soft landing trend, Cleveland Fed President Mester pointed out afterwards that the U.S. labor market remains strong and inflation is still too high. The future rate decision will be based on the upcoming data release.

Source: SignalPlus, Economic Calendar

In terms of options, the trading volume over the weekend remained low as usual. The IV for BTC has fallen below the support level of 30% for the past three weeks, but returned to above 30% before the start of the new week's Asian market, with an overall rebound of around 1-1.5% Vol compared to the previous day. In addition, it is worth noting that during the past two days when market liquidity was poor, the IV for BTC/ETH in the current week experienced a breakthrough phenomenon from Sunday evening to night time (UTC+8), with the Deribit ETH ATM IV surging close to +12% Vol from its low point to reach a level of 41%, but gradually gave back almost all of the gains.

Source: Deribit (As of 4 Sep 16:00 UTC+8)

Source: SignalPlus

The slope of the BTC/ETH curve has remained at a low level since the SEC officially announced the postponement of the ETF review decision, and even the mid-stage RR of BTC has started to fall into negative territory, below the 25th percentile.

Source: SignalPlus

In terms of bulk trading, the largest flow of BTC comes from two exchanges made by SHORT DIAGONAL CALL SPREAD, where one closing position of 27 OCT 23-32000-C is sold at the same time as 24 NO V2 3-29000-C is sold, earning premium while protecting against potential price rebounds in the near term; and at almost zero cost, another trade swaps selling October-end 28000-C for an equal amount of year-end 34000-C.

On the ETH side, on one hand, there is a large number of LONG CALL CALENDAR, selling in October and buying in November, following the footsteps of the SEC review; on the other hand, at the current price stabilizing and with the scenario where Put IV is more Vol Premium than Call in the middle and front, there is a large amount of Put Spread selling on ETH from September to November, and most of the selling positions are chosen at the key support level of 1600-P.

Source: Deribit Block Trade

Source: Deribit Block Trade

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