Monday Alpha #8

Vol news, charts and thoughts on DeFi options trading in our Monday Alpha by Premia x Marty!

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: Bank Holiday in US, All Eyes on BTC Options, Bonds Gone Wild

BTC ATM IV

  • 1W: 34.05%

  • 1M: 34.47%

  • 3M: 39.57%

  • 6M: 47.83%

  • Index Price: $27,429

  • DVOL: 39.97

ETH ATM IV

  • 1W: 33.45%

  • 1M: 30.44%

  • 3M: 33.64%

  • 6M: 42.47%

  • Index Price: $1,588

  • DVOL: 38.28

Things To Pay Attention To

Geopolitical Uncertainty

  • Escalating tensions In Israel and surrounding area

Wednesday, October 11

  • 8:30 AM EST - PPI

  • 2:00 PM EST- FOMC Minutes

Thursday, October 12

  • 8:30 AM EST - USA CPI, and Unemployment Claims

As it's Monday, we will try to keep it short pimps.

In light of the major escalation between Hamas and Israel, the global financial landscape will undoubtedly be affected. Historically, when Mr. Market senses such geopolitical uncertainty, we witness short-term volatility, often manifesting as sell-offs. Over time, however, markets tend to stabilize as events get priced in and things settle. I think we are seeing this first in crypto this morning as today is a bank holiday, crypto is the last free market and is the first to move.

Specific sectors might experience growth, while others could face significant downturns over the next few months. Given the nearby Middle East's pivotal role in oil production, the oil sector might be particularly volatile.

Additionally, during periods of heightened geopolitical tension, investors often pivot towards safe havens, potentially benefiting assets like gold. This could also be a test for Bitcoin… will it solidify its reputation as "digital gold", or will it be perceived as just another risk asset?

As investors, it's essential to tread cautiously, avoiding any hasty decisions that could position us offsides.

BTC, ETH, NQ, GOLD Prices

BTC, ETH, and Gold vs. NQ 30-Day Correlation

This morning we are watching BTC-ETH and Gold-BTC closely as tensions rise.

The interplay between these assets offer insights into the shifting dynamics of traditional and digital assets in response to geopolitical events. Historically, gold has been a reliable refuge during turbulent times, and its relation to Bitcoin will be particularly telling.

On the other hand, the BTC-ETH pair provides a glimpse into the relative strength and investor sentiment within the cryptocurrency market itself.

BTC Gamma Exposure by Strike

ETH Gamma Exposure by Strike

Since our last newsletter was highlighting predominant upside activity fueled by ETF hopium, current trends show a distinct shift.

We're now observing an increase in downside protection, suggesting growing caution or hedging among investors in both BTC and ETH alike. This change underscores the market's dynamic nature, especially in the face of rising geopolitical tensions.

Areas of interest:

  • BTC: $26,000, $28,000

  • ETH: $1,600

BTC At-The-Money IV

ETH At-The-Money IV

Interestingly enough vols have only slightly picked up. We got asked today if today was the day the vol regime shift… and well… it doesn't look like it today, but things can change. Front-end 1-week ATM has picked up on both BTC and ETH, but 6-month is unchanged.

We will watch how this develops, as today is a bank holiday in US and the conflict in Israel is just beginning. Markets change quickly, as traders we have to be able to adapt at any time.

Thoughts by Marty

I do not know where this leads, and the geopolitical landscape is a hard one to navigate, with many moving parts.

I am expecting market uncertainty this week as tensions rise and the US has economic data coming out later in the week. I would expect other players in the region near Israel to join in the conflict and for things to escalate from here. This isn't to say that the world is ending (right?) and that markets go to absolute 0… but there is always a risk. With short term uncertainty, markets should be turbulent and the ETF hopium should be put on hold. On the bright side, this volatility should be short term as things become more clear, and things start to get priced in.

To add onto this, we have US 2y, 10y, and 30y yields rallying into numbers not seen since the great financial crisis. With rates being high, and being attractive to long term risk adverse investors. Simply meaning investors will flee risk assets to lock up monies to get a 5%+ yield. We await to see economic data from the US mid week to reevaluate positions.

Wrap-Up

Areas of Interest:

  • BTC: $26,000, $28,000

  • ETH: $1600

Recap:

  • Geopolitical tensions are still rising

  • Vols still muted/low

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