Crypto Volatility Surfaces Show Lower Expectations and Greater Demand for Put Protection
Summary
This commentary examines BTC and ETH derivatives positioning after a mid-August selloff. It compares at-the-money implied volatility across maturities, volatility smile steepness, and one-month 25-delta risk reversals. The report says spot prices were unusually flat and near the levels it cites, while short-tenor implied volatility remained subdued and longer-tenor volatility was higher. It also observes that ETH options were priced at lower volatility than BTC options, continuing a longer-running pattern described in the article.
The options analysis finds that ETH smile steepness moderated to roughly match BTC, although both remained high relative to their recent history. Since steep smiles price far-from-the-money options at higher volatility than at-the-money options, this points to comparatively expensive wings. Risk reversals tilted further toward out-of-the-money puts in both assets, suggesting increased demand for downside protection. Lower futures-implied yields and small funding rates also accompanied the shift. These are descriptive market indicators from the period covered; the article gives no trading rules, causal test, or evidence that the signals predict future returns.
Key ideas
- One-month at-the-money implied volatility was subdued while longer-tenor implied volatility was higher.
- ETH options were priced at lower implied volatility than BTC options in the period discussed.
- ETH smile steepness eased to a level similar to BTC, though both smiles remained historically steep.
- Risk reversals shifted toward out-of-the-money puts, indicating stronger demand for downside protection.
- Lower futures-implied yields and small funding rates accompanied the change in derivatives sentiment.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.