SignalPlus Volatility Column (20240307): The market has entered a short "cooling-off period", and put spreads are very popular
Yesterday (6 MAR) Federal Reserve Chairman Powell gave a speech, reiterating the view that interest rate cuts depend on the next economic trend and that the Fed needs to be more confident in inflation before it can cut interest rates. At the same time, he mentioned the possibility of major adjustments to the banking industrys capital reform plan. Fed Kashkari stated that his basic expectation is not to raise interest rates again, but if inflation becomes more entrenched than expected, the Fed will first consider extending the time limit of high interest rate policy, and further stated that if the economy is performing well, why cut interest rates? In terms of data, U.S. ADP employment recorded 140,000 in February, the largest increase since December last year, and private companies added 140,000 jobs, significantly higher than the pre-epidemic average of 50,000.
Source: SignalPlus, Economic Calendar
In terms of digital currencies, prices temporarily calmed down after experiencing yesterdays V-shaped sharp fluctuations. BTC and ETH fluctuated slightly around 66000/3800 respectively during the day. The accumulated tension in the options market was quickly released, causing short-term volatility to drop by more than 12 % Vol, the 7D ATM IV indicator fell below the 7D RV. From the transaction point of view, whenever the market enters such a cooling off period, the transaction distribution tends to shift to the mid-to-long term, and today is no exception. ETH 26 APR completed a group of 3600 vs 4600 for a single transaction of 18750 ETH. Long Call Spread has become the focus of the market, and there are many Sell Call Spread transactions for BTC in the period after the end of March. In addition, yesterdays plunge may have caught many people off guard. Todays IV drop has attracted Put Spread positions concentrated at the end of March (such as BTC 65000 vs 60000), which can provide certain protection for recent long positions.
Source: Binance & TradingView
Source: Deribit (as of 7 MAR 16:00 UTC+8)
Source: SignalPlus
Source: SignalPlus
Data Source: Deribit, BTC transaction distribution
Data Source: Deribit, ETH transaction distribution
Source: Deribit Block Trade
Source: Deribit Block Trade
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