Crypto Options Skew, Volatility, and Dealer Gamma During a Sell-Off
Summary
This market recap describes how a sharp Bitcoin and Ether sell-off affected realized and implied volatility, term structure, option skew, trading flows, and dealer gamma. Short-dated put demand pushed weekly skew into put premium, while longer-dated skew remained tilted toward calls. The discussion interprets that split as near-term demand for downside protection alongside continued longer-term optimism, with Ether showing somewhat stronger long-dated call skew than Bitcoin.
The recap gives examples of activity across expiries, including put spreads bought for protection, call positions adjusted or sold, and buyers of Ether volatility. It suggests selling puts to enter or add to underweight positions, while stressing position sizing because leveraged positions can be liquidated quickly. It also links negative Bitcoin dealer gamma to greater potential volatility around scheduled macroeconomic events. These are the author’s interpretations of a single week’s market conditions, not tested trading rules; the proposed outlook depends on spot prices stabilizing and recovering.
Key ideas
- A sharp sell-off lifted realized volatility and briefly increased front-end implied volatility in Bitcoin and Ether options.
- Short-dated skew shifted toward puts while longer-dated skew remained call-heavy.
- Option flows included downside protection purchases as well as profit taking and call trades across expiries.
- More negative Bitcoin dealer gamma may amplify moves around macroeconomic catalysts.
- Selling puts is presented as a way to enter positions, with position sizing emphasized because of liquidation risk.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.