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Crypto Options Positioning During a Bitcoin Breakout

Article Deribit Insights
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Summary

This market note examines a sharp Bitcoin rally and the accompanying changes in realized and implied volatility, term structures, skew, option flows, and dealer gamma for Bitcoin and Ethereum. It connects traders’ expectations to a possible Bitcoin ETF decision window, while also noting macroeconomic and on-chain factors cited as support for the broader rally. Reported evidence includes rising short dated volatility, changes in call skew, Bitcoin call spread activity, Ethereum call spreads and maturity rolls, and contrasting dealer gamma positioning in the two assets.

The author discusses covered weekly call overwriting after the rally and a relative value call switch that is long Ethereum calls and short Bitcoin calls, with far out of the money options suggested to reduce exposure to near term noise. These are market views, not tested strategies: the note supplies no systematic backtest, trade sizing rules, or quantified risk limits. Its observations and recommendations are tied to the market conditions and ETF expectations described at the time, so they may not generalize to other periods.

Key ideas

  • Bitcoin’s price rise coincided with increases in implied volatility and short dated volatility measures.
  • The note reports bullish call spread activity and profit taking in Bitcoin, alongside longer dated Ethereum call demand.
  • Bitcoin dealer gamma became less negative after call profit taking, while Ethereum dealer gamma was reported as positive.
  • The author proposes covered weekly calls and a long Ethereum, short Bitcoin call switch as conditional ideas.
  • The strategy suggestions are not supported by a systematic backtest or explicit risk limits.

Tags

CryptoOptionsVolatilityDerivatives pricingRisk management

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