It has been another exciting week for us here at BitOoda. We brokered and executed our first ETH option deal.
ETH U (9/27/19) $300 call TRADES $19.15 for 500 contracts
As we always put Regulations at the forefront of what we do here at BitOoda, this trade was submitted to the SDR (Swap Data Repository) ICE Trade Vault. We firmly believe that any swaps or options traded bilaterally MUST be reported to an SDR to maintain CFTC/NFA Compliance. Failing to report trades properly could result in serious fines and/or suspension (found under section 2.9 Disciplinary Rules on the ICE Trade Vault website). Firms that are trading against OTC Options market makers that do not handle these transactions appropriately should consider the use of an NFA-Registered Introducing Broker, i.e. Ooda Commodities to execute options trades on their behalf.
With that out of the way, lets take a look at ETH versus BTC implied vol while we are here.
As you can see from the charts provided by https://www.sk3w.co/correlation_spread, ETH implied vol was priced ~15% above BTC implied vol for the first half of June. This was a function of BTC implied vol coming off from ~90% to ~70%, as ETH vol only came in from the low 90%’s to the mid 80%’s.
The rally to new highs at the end of June and early July put these implied vols back into line as they both jumped above 125%, to settle back in to roughly 100%. To date, and at the time of the ETH options trade we executed this week, there was a minimal spread between ETH and BTC implied options prices. Therefore, by purchasing ETH options you are not necessarily overpaying for VEGA compared to purchasing BTC options.
Another factor that helped influence this trade is the fact that the ETH/BTC spread has been incredibly weak over the last few months. As you can see in the chart above, ETH vs BTC is currently trading below the purple support of 0.0250, where the spread held and bounced in November 2017, September and December 2018, as well as mid-May 2019. This support finally broke one month ago, in the second week of July. Therefore, getting long ETH calls is also a bet on the bounce in this spread, as it currently trades 0.018975, levels not seen since early 2017.