BitOoda Afternoon Report 5/26/2020 — Volatility

  • Traders should reduce Volatility exposure they have accumulated in their long call skew positions in the September-December periods. Call skew is approaching fair, but IV is elevated so continue to look for opportunities to sell into strength in calls (like the vol pop yesterday).
  • Stay with May and or/June risk reversals (long Call/Short put delta hedged). The put skew is still relatively high. IV is reasonable. Manage the decay on May positions as it may kill the profitability of this trade unless we move towards the top of the channel soon.
  • Contango in BTC spot to May CME contract is down to $37. It is worth rolling any May shorts into June to enhance returns.
  • Long call skew positions in the September-December periods still make sense if you have had them (not as a new holding). Call skew is approaching fair. IV is fair in September and still elevated in December. We recommend covering any short exposure you have accumulated in September. Leaning short Vega in December still makes sense.
  • Exit May and reduce June risk reversals (long Call/Short put delta hedged). While the put skew is high, the implied volatility is reasonable to cheap. We are prone to a correction here and do not want to get caught too short Gamma. The trade made money on Decay and IV over the last 7 days.
  • Contango in BTC spot to May CME contract is down to $5. It is worth rolling any May shorts into June 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.