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BTC Volatility Surface Shifts and Lyra’s On-Chain Options Model

Article Amberdata research
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Summary

This report examines BTC options and futures behavior in Q1 2023, then introduces Lyra as an automated market maker for on-chain options. It contrasts AMM and order-book models and frames DeFi options as an evolving market without an established analytical framework. The available excerpt focuses on the BTC volatility surface rather than Lyra’s mechanics or the later 0DTE study mentioned in its introduction.

The analysis describes a shift from the negative spot-volatility relationship seen in 2022 to a generally positive one in Q1 2023. It links volatility term structure, risk reversals, options activity, and futures basis to price moves and events including the banking crisis. The report interprets returning call-wing premiums and higher BTC options activity as evidence of changing flows, while noting that the causes may include shifts in call-selling supply. These observations cover a short, unusual market period and do not establish whether the regime change is lasting or provide a tested trading strategy.

Key ideas

  • BTC’s spot-volatility relationship shifted from negative in 2022 to generally positive in Q1 2023.
  • Upside price moves coincided with sharp changes in the at-the-money volatility term structure.
  • The 25-delta call wing regained a premium over at-the-money volatility during the quarter.
  • BTC options volume and open interest regained relative prominence versus ETH in the period discussed.
  • Wide swings in futures basis can affect option pricing by adding another source of payout variability.

Tags

CryptoOptionsVolatilityDerivatives pricingFutures

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.