BTC and ETH Volatility, Call Skew, and ETF Expectations in October 2023
Summary
The review examines October 2023 crypto options pricing alongside spot moves in Bitcoin and Ethereum. It compares implied and realised volatility, including the BTC-to-ETH volatility ratio, and tracks how demand for upside exposure shifted options skew toward calls. The analysis reports that realised volatility remained historically low even as implied volatility returned to the mid-50s, widening the gap between expected and delivered movement. It also notes that BTC’s realised volatility rose relative to ETH’s, while ETH lagged BTC’s spot rally.
The authors connect call demand to ETF expectations, possible dealer short-volatility positioning, and the resulting market dynamics. They caution that ETF speculation alone may not explain the volatility premium: macroeconomic uncertainty and ETH’s similarly elevated implied-to-realised ratio complicate that account. A comparison with the period around Ethereum’s Merge offers context, but the article presents it as an imperfect analogy. The evidence is descriptive and based on market measures and charts; it does not establish that call buying or ETF developments caused subsequent price moves.
Key ideas
- Implied volatility can rise sharply while realised volatility remains low, creating a large premium for options.
- BTC’s realised volatility increased relative to ETH’s, even as ETH underperformed in the spot rally.
- A call-favoring skew reflects stronger relative pricing for upside options than downside options.
- ETF expectations may contribute to call demand, but the authors argue that they do not fully explain the volatility premium.
- The Merge comparison provides context for event-driven volatility expectations but is not a direct forecast for BTC.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.