Crypto Volatility Rerating Around FOMC: Gamma, Skew, and Call Demand
Summary
This desk commentary examines Bitcoin and Ether options around a Federal Open Market Committee rate decision. Before the announcement, front-end implied volatility rose while spot prices were relatively steady; after the rate increase, volatility fell quickly as spot prices swung lower. The author attributes some of the short-dated volatility movement to gamma positioning, noting prior demand for options and dealer exposure that could amplify price moves when hedging is required.
The note also compares BTC and ETH volatility skew and upside call demand. Bitcoin call buying returned after the initial post-announcement pullback, while Ether’s skew shifted sharply from put preference toward calls and then corrected. Longer-dated call volatility in the two assets converged, which the author considers unusual versus historical differences, but cautions that attempts to trade a reversion have been hazardous. These are desk observations and hypotheses tied to a specific market episode, not a systematic study; the discussion offers no reproducible dataset or validated forecast, and event-specific supply and demand could alter the patterns.
Key ideas
- Front-end implied volatility rose before the rate decision and fell sharply afterward amid choppy spot trading.
- Dealer gamma exposure may contribute to amplified hedging during rapid price swings.
- Bitcoin call demand resumed after the announcement despite an initial retreat in spot and volatility.
- Ether’s options skew reversed from put demand toward calls before correcting.
- Convergence in longer-dated BTC and ETH call volatility may be temporary, and mean-reversion trades can be hazardous.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.