Monday Alpha #13

It is indeed Monday — the alpha is free on Mondays. It’s Carnival here in Brazil, so we will keep it short.

Please note that Premia does not provide investment advice, and nothing herein should be construed as such. Anyone considering trading or holding derivatives or crypto assets should be aware that the risk of loss can be very high, and it is upon each individual to seek advice from an appropriate professional advisor.

TLDR: Vol Picks Up, The Institutions Are Here For Your Coins

BTC ATM IV

• 1W: 49.05%

• 1M: 50.11%

• 3M: 57.87%

• 6M: 60.85%

• Index Price: $48,730

• DVOL: 53.51

ETH ATM IV

• 1W: 47.84%

• 1M: 49.30%

• 3M: 56.23%

• 6M: 59.57%

• Index Price: $2,524

• DVOL: 52.32

Short story on this trade… someone sold me a mispriced option… the option was worth $300 and they sold it for 20 cents. Beauty of decentralized finance — anything is possible. Of course we had to go with the biggest booba ever seen by a human for this PNL card.

Before we get into it, Premia’s Trading Comp is still running with a $100k total prize pool! Sign up to the TC here or catch up on the details here.

Weekly Insights from GreeksLive

• To Join Greekslive Block Marketplace: t.me/GreeksLive 

• Find Greekslive On Twitter: https://twitter.com/GreeksLive 

Once again, we extend our gratitude to GreeksLive for their consistent weekly insights and to be able to provide these insights to our readers. As we can’t see the full book of these traders, we can only speculate on what their ideas are and their positioning. Seems like most of the biggest trades were focused on downside protection or selling vol… overall looks like that they got rinsed on these trades and price continued higher and higher, with vol picking up.

We're at a critical point for BTC-NQ and ETH-NQ correlations, which are nearing levels historically indicative of reversion and increased alignment. With stocks nearing all-time highs, a positive correlation realignment among these asset classes is expected, signaling a closer synchronization in their movements. It appears that risk assets are back.

How to read the correlation chart: A value closer to 1 indicates a strong positive correlation, meaning both assets move in the same direction, while a value closer to -1 indicates a strong negative correlation, meaning the assets move in opposite directions. A correlation near 0 suggests no linear relationship.

Today you had some interesting trades cross the options tape. You had people outright buying 50k - 75k BTC Calls between April and June. You can visually see the upside appetite here in the charts above. As vols are picking up and we are headed into major events including the Halving, ETH ETF, and US Presidential elections, my assumption is that risk assets continue to climb higher.

Areas of Interest:

• BTC: 50k

• ETH: 2500

Following the spot ETF introduction, volatility being in the 40s last week presented an opportunity for traders to reposition their portfolios. Since then, we've observed both volatility and prices moving steadily higher in tandem, signaling a phase of heightened market activity and potential re-evaluation of asset strategies.

Over the past few newsletters we have highlighted when IV and HV cross and what it means. Overall, IV now trading over HV as price increases is good. Last newsletter we mentioned that the good old Sell Short-Term Garbage to fund the Long-Term Vega Play trade was back in business.

This has been executed flawlessly and now we can hold our positions into the sunset.

I wanted to bring back the BTC and ETH ATM IV 3-month visual chart. Here we clearly see IV's picking up into the ETF event, selling off and now steadily climbing into the next events. As events come and go, the outcome is almost always the same… vol and hype grow into the event, just for it to be crushed post event, everyone regathers and then the vol cycle repeats itself. It's important to note that we're discussing volatility here, not price.

Forwards were a big request from our readers. Today is not a full lesson in forwards, as we will save this for the next Premia Academy Courses coming out. It should be coming out before months end.

As of now, Term structure has returned to normal… during ETF hype this chart got super wonky and was all over the place. The charts above is the Implied Volatility term structure charts that show the relationship between implied volatility and time to expiration of options contracts. This structure provides insights into how traders anticipate the volatility of an underlying asset to change over time. If we are buying long-dated Vega, we want to see the further dated contracts continue to rise in IV.

Expecting to see this play out and rise back into 70 or 80 handle as events are coming soon. Again, we will write up an Academy Course specifically about this chart and how to read it, and we will do a deep dive of forwards. Expect the end of the month pimps.

• Charts from VeloData: https://velodata.app/ 

• Twitter: https://twitter.com/VeloData?s=20 

Marty’s Thoughts

As the ETF hype dies and the dust settles, we can see the inflows of ETFs have been outright positive and as a collective they hold around 1% of total BTC supply. We expect this number to increase. Indeed the institutions are here for your coins.

By the looks of it, it seems traders who were holders of GBTC, a product that went -50% to NAV, reset their positioning. GBTC saw tons of outflows as traders either took profit or moved into other ETF products with more favorable fees. This is common and I wrote the above of this newsletter before the recent pop to 50k.

I would expect price and IV to continually increase into the next events and into the end of the year. Selling short term garbage to fund the long term Vega play worked, and we continue to hold these positions while managing the portfolio.

Wrap-Up

Thank you for being an active reader of our biweekly newsletter, I appreciate your comments and questions. The monthly breakdown will cover more things in-depth, and we will be adding to the Premia Academy as well so we can cover new topics here throughout the year.

As a final wrap up, if you are looking for a community to talk vols, options or coins, we have the Marty Channel available for free!

Recap:

• Big Booba

• Vols picked up

• Term Structure back to normal

• Correlation reversion

• Institutions are here for your coins

• We ride off into the sunset.

Areas of Interest:

• BTC: 50k

• ETH: 2,500

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