Crypto Options Flow, Skew, and Gamma Around CPI and Weekend Trading
Summary
This weekly market commentary tracks Bitcoin and Ethereum options flow around U.S. inflation data and a volatile weekend. It describes traders buying short-dated risk reversals and downside protection, absorbing options supply in straddles and put spreads, and increasing demand for implied volatility. Before the CPI release, a large near-term straddle purchase lifted front-end gamma demand; after the data, volatility eased as positions were unwound, though subsequent spot swings renewed interest in gamma. The account ties changes in skew and term structure to these flows and to event timing.
The author also examines short-dated Ethereum call buying and its possible effects on implied volatility, dealer hedging, and spot prices. Volatility rose despite light trading, especially in thinner weekend markets, but the commentary stresses that the relationship is ambiguous: spot purchases, existing short-gamma positions, volatility supply, and market liquidity may all have contributed. It is a qualitative flow interpretation with limited volume context, not a repeatable signal or performance-tested strategy. The events and strike references are specific to July 2022.
Key ideas
- Pre-CPI demand for short-dated options lifted near-term gamma and pushed the term structure toward backwardation.
- After the inflation release, option unwinds reduced front-end volatility, while subsequent spot swings sustained gamma demand.
- Short-dated risk reversals and put spreads were used to express downside protection and respond to changing skew.
- Ethereum call buying coincided with higher implied volatility, but the author cannot isolate its effect on spot prices.
- Thin weekend liquidity and dealer hedging complicate interpretation of observed volatility moves.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.