SignalPlus Volatility Column (20231017): Fake news hits the market

Yesterday (16 Oct) Philadelphia Fed President Harker continued to send out dovish signals, reiterating that the Fed should not consider further raising interest rates and expected inflation to weaken. The futures market predicts that the probability of the Fed raising interest rates in November is less than 10%, and that in December it is only 30%. Affected by this, risk appetite for U.S. stocks recovered, with the three major stock indexes closing up about 1%. US Treasury yields are back on the rise, with the 30-year yield rising 11bp. The call/put ratio for SPX 0 dte options has risen to its highest level since late summer, while trading volume continues to increase, indicating that the market is still biased towards risk and seeking opportunities for upside.

Source: SignalPlus, Economic Calendar

In terms of digital currency, Cointelegraph, a news media focusing on the currency circle, published an article yesterday evening (16 Oct) stating that the SEC has passed the review of BlackRock’s Bitcoin spot ETF (iShares Bitcoin Trust). Such amazing news has caused a stir since last Friday. The markets heartstrings have tightened since the SECs delayed review incident, which once caused the price of BTC to break through the US$30,000 mark. However, less than 20 minutes later, FOX reporter Eleanor tweeted that BlackRock had confirmed that the news was wrong and the application was still under review. After this dramatic turn, the price of BTC quickly gave up all its gains and returned to below 28,000. Although the news has been disproven, the price of BTC continued to fluctuate higher today, with delivery at 28342, closing up 1.62%.

Source: Binance & TradingView

In terms of options, after the hustle and bustle, the market is still frightened by this impact, causing BTC IV to remain high. 1 w/1 m ATM IV increased by 5.68%/3.25% respectively compared with yesterday, forming an inverted pattern on the front end together with ETH.

Source: Deribit (as of 17 Oct 16:00 UTC+8)

Source: SignalPlus

On the other hand, yesterdays fake news provided a preview for the market to some extent, and coupled with the recent SECs repeated delay in review, the demand for buying call options has increased significantly in the near future, promoting the tilt of the volatility surface. . From a transaction perspective, a large number of bullish strategies have emerged in the bulk market in the past 24 hours. For example, Long Call Spread, represented by BTC’s year-end 31,000 vs 37,000, recorded a cumulative transaction volume of more than 2,900 BTC yesterday; there is also a customized strategy that is buying While investing 1,000 contracts at 28,000-C at the end of the year, he sold 500 contracts at 28,000-C at the end of the year to recover part of the cost. It was noted that due to the inversion of the volatility curve, the short-term contract IV in this strategy exceeded the forward. A similar situation appears on ETH. The buy call spread at the end of October and the bullish triangle spread strategy represented by Buy 3 Nov 1650 C vs Sell 29 Dec 2600 C have become the focus of the market.

Source: SignalPlus

Source: Deribit Block Trade

Source: Deribit Block Trade

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