Crypto Option Flows, Spot–Volatility Regimes, and Volatility Risk Premium
Summary
This webinar recap summarizes Q2 2023 analysis of crypto options, focusing on how spot price moves relate to implied volatility, how option trade direction can be inferred, and how Bitcoin’s volatility risk premium compares with realized volatility. It reports that Bitcoin and Ether had similar negative spot–volatility relationships in 2022, while their patterns diverged somewhat in 2023 amid events affecting each asset differently.
The researchers describe a trade-direction method using roughly 30 heuristics to identify the true aggressor, including for block trades and resting orders, because exchange taker labels alone may not reveal dealer positioning. Using DVOL as a normalized implied-volatility measure, they find Bitcoin options were generally priced above realized volatility, with a positive median premium. This supports considering short-volatility exposure as a baseline tendency, but the recap does not provide a complete strategy, risk controls, or out-of-sample performance. Its observations are tied to the Q2 2023 sample and should not be treated as a guarantee that the premium persists.
Key ideas
- Spot–volatility relationships differed between Bitcoin and Ether across 2022 and 2023.
- Exchange taker labels alone may not reliably reveal dealer positioning in complex trades.
- The researchers used a heuristic algorithm to infer the true aggressor across trade types.
- Bitcoin options generally showed implied volatility above realized volatility in the reported sample.
- A positive volatility risk premium may favor short-volatility strategies, subject to risk and regime changes.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.