Monday Alpha #18

TL;DR: Vols Drifting Higher, Ethereum Spot ETF, What If?

Monday Alpha

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TL;DR: All Eyes on ETH ETF — What If?


  • 1W: 51.03%

  • 1M: 55.80%

  • 3M: 62.92%

  • 6M: 67.78%

  • Index Price: $67,032

  • DVOL: 58.59


  • 1W: 59.42%

  • 1M: 60.94%

  • 3M: 66.39%

  • 6M: 70.85%

  • Index Price: $3,090

  • DVOL: 65.12

The Ethereum Spot ETF; Let’s Talk About It

This week, ETH ETF deadlines are due, and there is still uncertainty regarding SEC chair Gary Gensler's stance on these products, and the uncertainty of the outcomes are driving up volatility. The SEC must decide on VanEck's spot Ethereum ETF application by May 23rd and ARK Investment Management's by May 24th. ARK and 21Shares recently removed a staking clause from their application, though Fidelity has added staking to theirs.

We're seeing a pickup in volatility leading into the ETH ETF event. The worst-case scenario is a push with guidance for the next deadlines in August. If an approval happens, ETH is expected to trade significantly higher, as it's unexpected. A push with clear guidance will also likely result in higher trading, while a push with vague language will probably keep ETH trading at the same price as the dust settles.

A potential strategy is to capitalize on the current volatility by picking up some "cheap" vol, selling 90% of position before the event, and leaving a small position as a potential runner. This seems to be working so far.

Weekly Insights from GreeksLive

Recent flows from GreeksLive highlight increased activity, with people buying up vol at the lows. The most popular strategy this week is the butterfly spread. Below is a brief summary.

Butterfly Spread Structure:

  1. Buy 1 contract at 75k

  2. Sell 2 contracts at 80k

  3. Buy 1 contract at 85k

Key Points:

  • Max Payout: Occurs if the price is exactly 80k at expiry.

  • Profit Range: The strategy is profitable if the price is between 75k and 85k, with the maximum payoff at the 80k strike.

ETHE Discount to NAV

The ETH ETF news is the only significant catalyst for the crypto market until the U.S. elections at the end of the year. Let's revisit the ETHE discount to NAV. If you believe the ETF will be approved, this could be an interesting play. If approved, the discount to NAV should drop to zero. Currently, it sits at 20.52%, down from a peak of a discount of 25% when we first mentioned this play in a previous newsletter. The closing discount to NAV leading into the approval week might be a positive sign overall.

BTC & ETH Implied Volatility Term Structures

Back-end volatility is climbing higher, slowly but steadily. The back-end positions we've been buying are now starting to pay off. This week, there's uncertainty around an ETF approval or a potential delay, driving volatility higher into the event with an expected sell-off afterward if there is negative news. Market participants are piling in, speculating on both a possible approval and potential guidance for the next deadline in August.

Selling short-dated options to finance long-dated Vega positions has proven effective once again pimps.

Marty's Thoughts

I wanted to overall keep the newsletter short and just about the ETF this week. For now… it’s choo choo, everyone is piling onto the "WHAT IF" train. This is the week, uncertainty and vol are climbing.

It's puzzling why no one seemed to care about the deadline until today, and everyone is rushing to get positions on Monday morning... There has been plenty of time to position for an increase in volatility, but now everyone is rushing in at the last moment. It seems people never learn, and that’s ok, it gives us more opportunities to profit from. Selling front-end to buy the back-end has continued to work and I don't think the trade is over quite yet.

Weka and I put out a long form article last week. If you haven't had a chance to read it, it can be found here: We will continue to put out a new monthly long form article. The next one will be ITM vs OTM options, which will provide insights I think most people either don’t know about, or have misconceptions of.



  • IV's drifting higher

  • All eyes on ETH ETF this week

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