Good Morning — Today we bring you an update of what we are seeing in the BTC Options Market. As we said last week, we believe option VOL is getting to cheap enough levels that those who want to take a view on a direction, or those who want to HEDGE their underlying position can do so in a cheap (relative to the last 2 months) way.
At BitOoda, we are never in shock or awe of what this market can or cannot do. We saw the majority of the digital asset space break down yesterday, led by ETH, as it collapsed to almost $100. The rest of the cryptocurrencies are now catching up to these losses in ETH. All signs lead to lower levels, potentially testing the lows of mid-December, which we have been calling for some time now. What catches our attention is that BTC option VOL is slightly CHEAPER than last week! When we reported this chart on Thursday 1/24, 3-month ATM vol in BTC was ~65%. It has come off ~2–3% since then.
With the potential for BTC to break to new lows, one would presume that VOL would go bid, as well as PUT-SKEW to blow out. If you are of the thesis that new lows are to be made in the coming month(s), then we see amazing opportunity to get long Puts in March or June, either as protection or as an outright trade. As you can see below, the Vol Surface Curve shows the current Put-Skew, however we would be of the belief that this skew should be much steeper if new lows are to be made.
Below is BitOoda’s Option Model and Vol Surface, complements of KRM22’s ProOpticus:
And finally, here is our Straddle Run: