BTC and ETH Options Volatility, Realised Volatility, and Skew in June 2023
Summary
The report reviews June 2023 volatility in BTC and ETH, comparing one-month at-the-money implied volatility with recent realised volatility and spot trading volume. It describes a pause in the prior decline in implied volatility as spot activity and delivered volatility rose, while noting that both remained below levels seen earlier in the year. ETH’s implied volatility fell below BTC’s for an unusually long stretch, alongside slightly lower recent realised volatility for ETH.
The report also examines option smile skew through 25-delta risk reversals and compares returns with contemporaneous skew before and after April 2021. It finds that large selloffs have tended to increase downside skew, while rallies have generally brought smiles back toward neutral rather than producing a strong call skew. The authors suggest that asset holders’ demand for short-term downside hedges may contribute, but say the reason for the shift in skew behavior is unclear. The analysis is descriptive and based on the period and market measures presented; it does not establish the cause or imply a trading signal.
Key ideas
- BTC and ETH implied volatility rose from a prolonged decline as realised volatility and spot volume picked up.
- ETH implied volatility remained below BTC’s, consistent with slightly lower recent realised volatility in ETH.
- Option smiles continued to price downside protection above comparable upside exposure for much of the period.
- Since early 2021, rallies have tended to move skew toward neutral, while selloffs have produced stronger downside skew.
- Short-term hedging by large asset holders is offered as a possible explanation, but the report does not establish the cause.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.