Crypto Options Volatility and Skew During the FTX Contagion

Summary

This weekly commentary reviews crypto options markets amid uncertainty following the FTX collapse. It discusses implied volatility, realized volatility, the term structure, and BTC risk reversal skew, arguing that downside puts remained in demand while the term structure returned to contango. The author sees potential for long put or put-spread positions, while warning that volatility selling could be dangerous as further contagion news emerges. The commentary also summarizes reported BTC and ETH options flows, including downside puts and longer-dated calls, and observations on trading activity and open interest.

The evidence is a dated market snapshot and selected flow reports, not a systematic strategy test. The author frames volatility and skew views as contingent on catalysts such as developments involving major crypto firms and stablecoins. The piece also relays product and market updates from options venues and protocols; their performance figures and yield claims are reported observations, not independently validated investment results. Its interpretations may quickly become stale as prices, volatility, and news change.

Key ideas

• The commentary uses term structure, implied versus realized volatility, and risk reversal skew to frame crypto options risk.
• BTC put skew remained negative, indicating greater pricing of downside volatility than upside volatility.
• The author considers long puts or put spreads where downside catalysts could make options appear underpriced.
• Reported block flows include both BTC downside puts and calls at longer expiries, but flow direction is difficult to interpret conclusively.
• The market views are tied to a specific week of exceptional uncertainty and are not a tested trading system.

Tags

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