Comparing BTC and ETH Option Smile Steepness and Downside Skew

Summary

This commentary compares Bitcoin and Ether option volatility smiles, emphasizing the one-month tenor and the SABR volatility-of-volatility parameter. It explains that higher volatility of volatility corresponds to a steeper smile, making far out-of-the-money options more expensive relative to at-the-money options. The reported snapshot shows shorter-dated options pricing steeper smiles than longer-dated options, which the authors interpret as demand for protection against sharp spot moves.

The article reports that Ether’s smile became steeper than Bitcoin’s near one month, alongside Ether’s higher at-the-money implied volatility and stronger skew toward out-of-the-money puts. It also describes a widening divergence over February, with Ether’s smile remaining elevated or oscillating while Bitcoin’s flattened. These observations suggest greater short-term concern about Ether volatility and downside moves. The evidence is a dated market snapshot and hourly comparison, with no strategy backtest or causal analysis; the interpretation reflects option prices at that time and does not establish future realized volatility.

Key ideas

• SABR volatility of volatility helps describe how steep an option volatility smile is.
• Higher smile steepness makes far out-of-the-money options relatively expensive versus at-the-money options.
• The article reports that short-tenor BTC and ETH options priced steeper smiles than longer-tenor options.
• Near one month, ETH showed a steeper smile and stronger downside skew than BTC in the reported period.
• The observations indicate market pricing at a particular time, not a forecast of realized volatility.

Tags

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