BitOoda Afternoon Report 11/24/2020 — Volatility

  • In December and March, put skew is attractive and calls are relatively expensive. Bullish price/vol traders may consider long call spreads (underhedged) or long puts (over-hedged). Neutral or bearish (Vol) traders (as well as those who do not expect a parabolic price blowoff) may consider risk-reversals (short call long put), especially in March as March IV is 10% higher than December.
  • Use contango to enhance returns. We are not aggressive here, as contango stayed relatively stable (therefore becoming less pronounced in APR terms) with rising price.
  • In December and March, put skew is attractive and calls are relatively expensive. With IV now elevated and over realized, we think scaling into short risk reversals (shorting the call) is the best risk reward strategy that combines both contango and IV edge.
  • Use contango to enhance returns. We are aggressive here, as widened to 12%-15% APR.

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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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