Crypto Option Flows: Skew Selling, Call Demand, and Volatility Risk
Summary
This weekly market commentary interprets Bitcoin option flows during a volatile October 2022 period. It reports put selling across October and December expiries, October call buying funded in part by November calls, and small outlays on call butterflies aimed at a possible year-end rally. The put selling reduced put skew, while offsetting call trades limited the effect on implied volatility. The proposed structures express upside exposure while taking advantage of elevated skew.
The later update describes sharply lower option risk premiums amid falling crypto prices. Call supply appeared on rallies, put selling occurred during declines, and some holders cut long put positions near perceived support. Short dated implied volatility remained above realized volatility while the term structure was in contango; the commentary also notes that put/call spreads may suit traders uncertain about implied volatility. These are dated observations of market activity, not a tested strategy or forecast, and the text provides no performance results or quantified risk analysis.
Key ideas
- Selling puts and buying calls can reduce put skew while maintaining positive call exposure.
- Call butterflies offer limited-cost exposure to a possible rally, with a high reward relative to the stated outlay.
- Option flow shifted toward risk reduction as crypto prices fell and uncertainty grew.
- Implied volatility above realized volatility and term structure shape the cost of option exposure.
- Put/call spreads are presented as an alternative when the direction of implied volatility is uncertain.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.