Market Data by Premia x Marty: #2

Now, let’s dive deeper into the events surrounding the March quarterly expiry and analyze the available data. We’ll also provide a more detailed breakdown of the charts to help our community better understand the information.

In our recap last month, we mentioned that volatility seemed cheap and larger players were buying longer-dated volatility, specifically the risk reversal plays mentioned. They sell 1x near the money and buy 2,3x wings. This turned out to be the right move.

Now, let’s dive deeper into the events surrounding the March quarterly expiry and analyze the available data. We’ll also provide a more detailed breakdown of the charts to help our community better understand the information.



All time volume: $305.97m



BTC, ETH, NQ and Gold Prices

BTC and ETH Prices

Above is a snapshot of current market pricing between various assets. BTC, ETH, NQ, GOLD

Over the past year or so, the Federal Reserve (Fed) has been raising interest rates, which means there’s less “cheap” money in the financial system. When interest rates are higher, money becomes more expensive to borrow, therefore there is less borrowing. Higher interest rates typically cause risk assets like Crypto to decline. With the Fed raising rates to around 5%, they were expected to continue this trend until something “broke” in the financial system.

In March something broke, the US experienced a regional banking crisis. To alleviate concerns, the Central Bank bailed out the banks and provided a backstop. Investors viewed this positively, believing the Fed might stop hiking rates in the near future and instead cut rates to prevent further financial issues. Traders also saw it as a return to money printing. This shift encouraged investors and traders to embrace riskier assets. Simply, if the Fed cuts rates and prints more money, risk assets are likely to increase. However, this may change if inflation rises too high, forcing the Fed to hike rates again in the future. For now, it appears the Fed is nearing the end of its current rate-hiking cycle.

Lower interest rates + printing money = risk assets go up.

Last week marked the Quarterly options expiry, offering traders and investors the chance to roll their positions from one quarter to another. The Bitcoin options market alone saw around $4 billion in notional value of options expire. Traders might prefer quarterly options over monthly ones for long-term strategies, slower time decay, and reduced sensitivity to short-term events. Quarterly options can provide diversification, higher premiums, and more liquidity compared to monthly or weekly options.

Rolling 30 Day BTC/ETH/NQ/GOLD Correlation

The correlation coefficient is a statistical measure that ranges from -1 to +1, where -1 indicates a perfectly negative correlation, 0 indicates no correlation, and +1 indicates a perfectly positive correlation. We received a request to add gold as well, this is shown below.

Rolling 30-day Correlation between BTC, ETH, and NQ

Rolling 30-day Correlation between BTC, ETH, and Gold vs NQ

A perfectly negative correlation means that as one variable increases, the other variable decreases. For example, if the price of gold goes up, the price of Bitcoin goes down. In this case, the correlation coefficient would be -1.

A correlation coefficient of 0 means that there is no correlation between the two variables. For example, the price of Ethereum might not have any correlation with the NASDAQ index. In this case, the correlation coefficient would be 0.

A perfectly positive correlation means that as one variable increases, the other variable also increases. For example, if the NASDAQ index goes up, the price of Ethereum might also go up. In this case, the correlation coefficient would be +1.

BTC Volatility Index (DVOL)

ETH Volatility Index (EVOL)

Currently, we’re in a period of low volatility, with underlying prices gradually increasing without any major events causing significant fluctuations in volatility. Here are some ways to utilize or interpret DVOL:

  1. Gauge market volatility: DVOL helps traders understand the asset’s volatility, which is important for options trading.

  2. Make decisions: By examining DVOL trends, traders can make informed choices when buying or selling options.

  3. Spot opportunities: Analyzing DVOL charts can reveal periods of unusually low or high volatility, potentially highlighting trading opportunities.

  4. Manage risk: Tracking daily volatility helps traders adjust their positions and hedging strategies to manage risk.

  5. Compare assets: DVOL charts for different assets, like ETH and BTC, allow traders to compare volatility profiles and choose which asset to trade.

Volatility vs Historical Volatilty for BTC

Volatility vs Historical Volatility for ETH

This chart depicts the implied volatility (IV) and historical volatility of an asset, providing valuable insights for traders. By comparing these two measures, traders can identify times when they may be overpriced or underpriced options, market volatility trends, and make more informed decisions. The chart can also help time trades during high or low volatility periods, manage risk by understanding the relationship between IV and historical volatility, and select appropriate trading strategies based on current market conditions.

BTC: 27K, 28K, 30K

ETH: 1600, 1800, 2000

ETH Gamma Exposure by Strike

BTC Gamma Exposure by Strike

Options (gamma) walls are option positions that puts a floor or ceiling on the market, they are the strikes with the most gamma is concentrated . A gamma wall chart provides a visual representation of the concentration of gamma at different strike prices. These charts can help traders identify points at which a gamma squeeze might occur(if price breaks through the walls), as well as the potential impact of that squeeze on the underlying asset’s price.

Here’s a brief summary of how a gamma squeeze works:

  1. A large number of call options are bought at a specific strike price, causing a concentration of gamma.

  2. As the underlying asset’s price moves closer to the strike price, market makers and other participants need to hedge their positions by buying more of the underlying asset.

  3. This increased buying pressure can cause the underlying asset’s price to rise further, which in turn increases the delta and gamma of the options.

  4. The cycle of buying the underlying asset to hedge positions can lead to a gamma squeeze, resulting in a rapid and significant increase in the asset’s price.

ETH Max Strike Call/Put Gamma Rolling

A rolling gamma option chart is a graphical representation of the gamma values of options across different strike prices for a specified time period.

A trader would use a rolling gamma option chart for the following reasons:

  1. Find important gamma levels: The chart highlights strike prices with high gamma, which can signal support and resistance zones and potential volatility.

  2. Predict market volatility: The chart helps traders anticipate periods of increased volatility due to market participants adjusting their positions.

  3. Adjust trading strategies: Traders can adapt their strategies based on high gamma concentrations to capitalize on potential price movements.

  4. Manage risk: Identifying areas with high gamma helps traders manage risk by adjusting positions or hedging exposure.

That finishes up our second newsletter, thank you for reading and let us know if you would like to see something new next time!

Let’s recap:

  • While vol was very very cheap, Traders into March were buying longer-dated upside exposure

  • This was the perfect play as all cryptocurrency and risk assets climbed in price since

  • CPI and USA data came in flat, and as expected

  • The correlation from traditional markets and crypto is getting stronger

  • Crypto is still outperforming the stock market in terms of year-to-date returns

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