Market Data by Premia x Marty #7
Monthly alfalfa in our Market Data newsletter!
We highly recommend completing the Academy courses to establish a foundational understanding of options and risk management. As we continue to develop the Marty Masterclass series, you can expect to see Marty Masterclass 2 and 3 released soon. These upcoming courses will offer more advanced classes and increased complexity to create a challenging learning experience.
Your feedback is vital for us to enhance the quality and relevance of future content, so we encourage you to share your thoughts after completing the courses. Thank you for being a part of our educational journey.
Please note, Premia does not provide any 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.
BTC $25902.29 56.67% YTD
ETH $1685.30 36.79% YTD
NDX $15490.86 40.34% YTD
SPX $4515.78 17.19% YTD
XAU $1940.73 7.03% YTD
BTC ATM IV
Index Price: $25902.29
ETH ATM IV
Index Price: $1685.30
BTC, ETH, NQ, and Gold Prices
BTC and ETH Prices
BTC, ETH, and Gold vs. NQ Rolling 30-day Correlation
Viewing from a longer-term perspective, the price action for BTC and ETH appears to be largely sideways, lacking significant upward or downward momentum.
This stagnation comes as the correlation with traditional stock markets weakens, marking a potential divergence in asset behavior. Meanwhile, gold maintains its stability, offering little directional cues for the crypto market. This changing landscape could signal a decoupling of asset classes and require traders to reassess their diversification and hedging strategies accordingly.
Overall, the lack of decisive movement in crypto majors, coupled with falling correlation to stocks and stable gold prices, suggests the market is searching for new catalysts or drivers. It's worth mentioning that in the beginning of the year, crypto was the first to move as stocks were flat. Now that stocks have risen, the tables have turned and crypto is flat.
In August, Bitcoin faced a significant price drop (doesn't look so significant when you zoom out) after failing to breach the $30,000 mark. Greyscale secured a legal win against the SEC, reviving discussions about a U.S. Spot Bitcoin ETF. Despite the win, Greyscale must still refile and await approval, leaving the ETF question open.
If approved, a Spot ETF would attract significant retail and institutional investment and alter the market dynamic, possibly leading to market segmentation between crypto-native and traditional investors.
On the volatility front, despite various catalysts like Greyscale's win and Bitcoin's sharp drop in price a few weeks ago, volatility shrinks swiftly in a phenomenon known as "vol crush." Bitcoin's daily volatility index (DVOL) is range-bound between 30-50, reinforcing the market's current state of limbo. However, the buying of longer-dated calls continues, indicating anticipation for future bullish events, including Bitcoin halving and a potential Spot ETF approval.
Despite the current volatility, I think that the SEC is unlikely to rush a Spot ETF approval without broader crypto regulation and tax guidance. While Greyscale's legal win is significant, the SEC retains the ability to deny the application for different reasons, potentially extending the approval timeline. Nevertheless, the very proposal of a Spot ETF by institutional players signifies the profit potential the Institutions see in this type of product.
1-month ETH ATM Implied Volatility (VeloData)
1-month BTC ATM Implied Volatility (VeloData)
ETH Volatility vs Historical Volatility
BTC Volatility vs Historical Volatility
When both BTC and ETH show higher historical volatility (HV) than implied volatility (IV), it signals potential opportunities for traders.
The situation may indicate underpriced options, making it an opportune time for buying. Lower IV also suggests the market expects less future volatility, so cost-effective hedging opportunities might be available. Traders could exploit this gap for arbitrage, although this carries its own set of risks.
Existing option holders might want to reassess their strategies in light of the HV-IV mismatch, potentially capitalizing on cheaper premiums if they expect a volatility spike. In essence, this HV-IV dynamic offers multiple avenues for traders to consider, depending on their market outlook and risk tolerance.
In the one-month ATM IV chart for August, a significant volatility spike is evident on the 18th, triggered by a price sell-off. Volatility has decreased since that peak. Traders often desire both higher volatility and higher prices, but it's worth noting that these two rarely move in tandem.
ETH Gamma Exposure by Strike
BTC Gamma Exposure by Strike
The Gamma Exposure chart continues to show downside exposure, likely indicative of protective measures. At the same time, upside call and call spread buying are also evident.
While traders commonly wish for increased volatility coupled with rising asset prices, the current gamma exposure suggests a market prepared for various outcomes.
The downside protection and upside call buying reflect market uncertainties. Traders seem to be guarding against both downside risks and positioning for potential upside, highlighting the multifaceted and often contradictory nature of market sentiment.
Thoughts by Marty
For now… we are in limbo pimps.
We are awaiting the next catalyst… we have have been given every opportunity for the crypto market to dig itself out… and yet… nothing. We have been writing for almost a year about this low muted vol regime, and honestly, I cannot wait to be full on bull posting and writing bullish newsletters. Imagine the Marty Memes in the bull market.
As we chop, now is not the time to be over leveraged, if you have conviction in your trades or your position then keep adding and maintaining this position. If this really is the next run up in the future, we would want to hold spot, nibble long dated futures and call spreads. It seems people will never learn, and that trading 100x leverage is gambling and you will not win long term like this.
As mentioned before we are not selling vol any longer, even if the low vol regime shifts. Maybe that will change if we really go into a freezing crypto winter, but right now there is a lot of very crypto specific news that instantly spikes vols, and we don't want to play in that sandbox any longer. We are focusing our time and energy on other places to generate monies.
I’m sure there will be a public announcement on Marty’s new venture. Until then, enjoy the new Options Masterclass series in the Premia Academy! We will continue to add to the series over the next month.
Areas of Interest:
BTC: 25k, 28k
ETH: 1600, 1900
Long dated call and call spread buying is still a favorable play amongst players
HV>IV in both BTC and ETH