Crypto Option Skew, Volatility, and Call Spread Selection

Summary

This commentary reviews BTC and ETH options after a sharp selloff and volatility spike. It compares the surge in short-dated at-the-money implied volatility and downside risk reversals with their subsequent retreat, then discusses how downside skew remained elevated as spot prices recovered. The author attributes persistent put richness partly to expected negative correlation between spot returns and volatility, and observes that out-of-the-money calls lagged even sticky-strike expectations during the rebound.

For traders seeking upside exposure, the note questions the value of very far out-of-the-money calls and suggests that wider call spreads may suit passive delta exposure better, depending on the trader’s objective. It also explains that steep call wings may still have value as convex exposure to volatility. These are qualitative judgments based on a particular market episode and quoted levels, not a calibrated valuation framework; fair value depends on assumptions about the distribution of volatility.

Key ideas

• Short-dated implied volatility can spike rapidly during a market shock and recede as panic fades.
• Put-heavy risk reversals may persist even when spot prices rebound.
• Out-of-the-money call prices should be assessed alongside their implied volatility and position on the smile.
• Wider call spreads may offer a more practical route to upside delta exposure than very far out-of-the-money calls.
• The value of long-dated calls as volatility exposure depends on assumptions about the distribution of volatility.

Tags

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