SignalPlus Volatility Column (20240830): Doorway Market

In the past day, the price of BTC rose by 4% to $61,000 during the Asian trading session, but then sharply dropped to $59,000 during the U.S. trading session, giving back all of its intraday gains. In fact, in the last three days, there has been a significant outflow of funds from BTC ETFs, and the increasingly strict regulatory actions by the U.S. SEC are threatening the crypto industry and NFTs. The market is experiencing increased selling pressure and bearish sentiment, with trading volume decreasing. The decline in perpetual contract funding rates also indicates a reduction in participation and heightened fear among traders. If the price breaks below the strong support level of $58,000, bulls may face significant liquidations again. Source: Farside Investors

Regarding options, the PCE data, which is favored by the Federal Reserve, will be released tonight at 8:30 PM. The implied volatility (IV) for the end of the month has slightly risen to around 50% due to the pre-priced uncertainty, while the forward IV for the weekend is approximately in the range of 36%-38%. Overall, the volatility levels have not changed significantly, and the situation for ETH is similar. Source: SignalPlus, Economic Calendar Source: Deribit (as of 30 AUG 16:00 UTC+8) Source: SignalPlus

Although the overall IV changes are not significant, there are noteworthy changes in the surface shape. First is the Fly; the smile curvature for BTC/ETH for the end of the year has significantly increased. In trading, we see bullish spread strategies represented by BTC 27 DEC 80000 vs 100000, with single-leg transaction volumes exceeding 200 BTC. Source: SignalPlus

On the other hand, the Vol Skew for ETH has returned to a low level. The decline in perpetual contract funding rates and changes in ETF inflows have led Ethereum to continue facing bearish trends. Although the coin price has attempted to rebound from $2,400 recently, it has consistently failed to break through the strong resistance at $2,600. Source: SignalPlus Data Source: Deribit, overall ETH trading distribution

A more noticeable flow for BTC includes the Long Put Spread on 6 SEP and the calendar spread at 66,000 on 13 SEP/20 SEP. Their impact can also be seen in the term structure of the Forward IV. For some traders, the non-farm payroll data to be released on the evening of September 6 is particularly critical, especially after Powell's remarks at the global central bank meeting in August. Although the options for 6 SEP will have expired by then, and there are no closer expiration dates available, this date may also cover the uncertainty explained by the previous day's small non-farm (ADP employment numbers) data. Data Source: Deribit, overall BTC trading distribution Data Source: Deribit, overall BTC trading distribution