Monday Alpha #28

TL;DR: Rektober or Uptober?

Author

Marty
October 07, 2024

Monday Alpha

Attention! This week we have Heart as a guest on the Premia X Marty show! We will cover Heart's intro to trading and CT along with their overall market bias heading into the U.S. elections. Will be Streamed on Wednesday at 2pm EST, 18hr UTC on the Premia X account.

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.

TL;DR: Rektober or Uptober?

BTC ATM IV

  • 1W: 45.09%

  • 1M: 49.39%

  • 3M: 55.29%

  • 6M: 57.92%

  • Index Price: $63,483

  • DVOL: 56.24

  • BVIV: 58.83

ETH ATM IV

  • 1W: 52.19%

  • 1M: 61.39%

  • 3M: 62.74%

  • 6M: 65.31%

  • Index Price: $2,477

  • DVOL: 64.07

  • EVIV: 66.99

Weekly Insights From GreeksLive

Some large notional volume traded the past week through Greeks.live Block Trade Marketplace! All of them being for the end of the month, and end of the quarter. We should start to see these plays roll into the Nov8 expiry for the U.S. Elections. Flows all over the place, not much discretional bias taken besides the put buyer. Bought puts at the bottom, a classic.

Options activity is starting to heat up, with players nibbling at various ETH October strikes. Larger players are extending their positions out to the 100k strikes into March. It seems that much of the market is focused on the upcoming elections and beyond. However, I'm not fully convinced by this narrative. Many of these calls were bought at the very peak of a recent price spike, which feels more like traders piling into FOMO, aping in just in case this is the big move.

2-Week Crypto Returns

Large Caps

Small Caps

2-week crypto returns not looking too hot, what happened to UPTOBER? Only memes are pumping, and this is unsustainable. As I write this, price is pumping….. back to prices not seen since October 1st, after a 7% drawdown on majors.

BTC & ETH Implied Volatility Term Structures

The Markets towards the end of the month should become more and more indecisive who the next U.S. President is leading to an increase in vol across the term structure. I would assume front end gets more and more lifted as the event nears. I’m looking at back end to raise more to 70+ handle and all vols get hammered back down post event. Front end should get near 100 handle.

Note: There is still a kink for Nov8 expiry

BTC & ETH ATM Implied Volatility

There is always talk of ETF inflows and outflows. Here is a CME OI chart, you can sees the ups and downs, go look into inflow/outflow times and it coincides. Cash and Carry trade is alive and well. For those new to this trade, A trader goes and buys spot (ETF), and goes and shorts the futures contract, waits… and captures the difference. This is a classic trade, very low risk, and very popular with institutions.

It will be interesting to see how many unwind the futures trade and roll into selling options on the ETF's when options start trading. SEC approved IBIT options recently, we are just awaiting a trading day. Institutions LOVE selling vol, Remember This.

Marty’s Thoughts

With markets muted so far into October, and vols generally flat, it will soon be a rush to the races to get into positions for the election… Creating havoc, and a spike in vols. You as a trader should be positioning early. Option plays seem ideal here over memecoin gambling. Just yesterday, we had a Sunday pump that got fully retraced before the Monday US open, leaving people whipsawed and rinsed.

Heading into elections, I am still in the boat that it doesn't matter who wins, and that assets like BTC go up against fiat forever… Though I am a little worried about the data coming out of the US and their revisions that constantly happen. Markets rally and the FED makes decisions on "great” data that then gets revised and marked down a few months later. You can use the FedWatch tool to check what the FED is going to do in terms of hikes, cuts and their guidance.

This is the main concern for me. The revision risk. Seems that numbers are getting better and better into the election, only to be revised. They were just recently wrong on almost 1,000,000 jobs in their reports over the summer… this is insane. The FED uses this data to make their decisions, and it seems like a slow and old way of doing it… I am sure there is a fix, but this I cannot control, nor can I fix it.

I don't want to be anti-crypto or anti-hope… But when these memecoins start running and everyone is posting 10000582034% returns, It’s never good for the space, and there is a flush to push out week hands. We only trade BTC and ETH for a reason.

Note: I will be drafting a standalone Basis trading article, and drafting new content for Premia V4 over the next few months! V4 includes Portfolio Margin, Perps, and more! Next newsletter I will bring some fresh charts and data to the readers!

Recap:

  • Uptober may be canceled.

  • Cash and Carry is alive and well.

  • Vol is meant to be sold.

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