BitOoda Afternoon Report 10/13/2020 — Volatility

  • In December and March, put skew is still attractive but calls have depreciated enough for them to be rolled down so that puts are spread to straddles, not calls.
  • In the front contracts, calls represent the best value spread to straddles. Call skew is cheap and IV is underperforming but not high. We recommend flat Vega, waiting for a breakout. An aggressive breakout trader should buy the straddle back or buy additional strangles/calls to increase leverage.
  • Use contango to October to enhance returns.
  • In December and March, put skew is attractive and calls are fair. We recommend being long Strangles or Puts either outright or spread to Straddles.
  • In the front contracts, smile is historically fair. Given the level of IV, both wings are attractive. We recommend being long wings on either side (or both), either outright or spread to straddles if uncomfortable with decay.
  • Use contango to October to enhance returns.

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BitOoda

BitOoda

A boutique digital asset investment bank focused on providing innovative and compliant capital markets solutions for institutional clients.

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