Skip to content
All library documents

ETH Call Spread Strategy Amid Rising Crypto Volatility

Article Deribit Insights
Read the original

Summary

The commentary links a strong crypto rally to liquid staking expectations ahead of Ethereum’s Shanghai upgrade, persistent call buying, changing option skew, and shifting expectations for US inflation and interest rates. It argues that increased staking could reduce ETH’s available supply for sale, while a possible Federal Reserve pivot might support risk assets. The market evidence cited includes changes in near-term implied volatility, differences between front and June expiries, and calls becoming more expensive than puts in some maturities.

The proposed position is to buy a June ETH 1800 call and sell a June 1300 put, with delta hedging. The authors describe it as long vega and present it as exposure to potential upside and a recovery in longer-dated volatility, while the short put offsets some cost and reflects their view that downside risk may be buffered. These are market opinions tied to conditions at publication; the trade can lose substantially if ETH falls, and the commentary does not establish that its macro or staking assumptions will hold.

Key ideas

  • The authors connect Ethereum’s planned Shanghai upgrade to a possible increase in staking and lower ETH selling supply.
  • Heavy call demand lifted near-term implied volatility and shifted some volatility skew toward calls.
  • The proposed position buys a June ETH call and sells a lower-strike June put, with delta hedging.
  • The position is intended to benefit from ETH upside and a rise in longer-dated implied volatility.
  • The trade depends on uncertain market and policy developments and carries downside exposure through its short put.

Tags

CryptoOptionsVolatilityDerivatives pricingDeFi

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