Crypto Options Views on Volatility, Skew, and Long Convexity

Summary

This weekly note reviews Bitcoin and Ether options conditions around March 5, 2023. It links falling spot prices to softening implied volatility, describes a contango term structure, and points to the largest roll-down between short dated maturities and the one month point. The author sees near dated implied volatility and call wings as relatively inexpensive, while also viewing six month risk reversal skew as a possible sale. The proposed trade expression is long volatility using slightly out of the money calls, with the note arguing that recent downside momentum appeared limited.

The evidence is a dated market snapshot: reported spot moves, volatility and skew observations, options flow examples, and summaries of structured strategy results. It also discusses liquidations and positioning differences between BTC and ETH, plus volatility selling strategies tied to Ether options. These observations are descriptive and specific to that week; the note gives no controlled backtest, trade sizing, or risk limits. Its directional suggestions depend on market and macro conditions and should not be read as generally validated signals.

Key ideas

• Falling Bitcoin spot prices coincided with softer implied volatility, and the short term volatility spike faded quickly.
• The note describes the volatility term structure as contango, with the clearest roll-down around the one month to one week interval.
• It views near dated call wings as relatively inexpensive and favors long volatility through slightly out of the money calls.
• The volatility risk premium was reported near a 90 day low, which the author interprets as fair value for long volatility.
• Options flow summaries show demand for downside protection and upside convexity, but they describe one week of activity rather than a tested strategy.

Tags

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