How Falling Crypto Volatility Can Shift Options Skew Toward Calls
Summary
This weekly report examines BTC and ETH futures, perpetual swap funding, and options volatility. It describes implied volatility falling in both assets after early-January ETF event risk had passed. Although volatility declined, out-of-the-money call volatility fell less than put volatility, shifting the smiles toward calls, particularly at longer maturities. The report also says futures yields rose after a period of stable, elevated rates, while funding paid by long positions increased, which it interprets as renewed bullish sentiment.
The options analysis distinguishes overall volatility levels from relative pricing across strikes: BTC’s previously bearish put skew had receded, while ETH’s smiles were neutral at short and medium tenors and more call-leaning at a longer tenor. Surface comparisons use hourly observations over the preceding 30 days and a SABR smile calibration. The document offers market snapshots and interpretations rather than a causal analysis or a strategy test, so it does not show whether these signals predict subsequent returns or are profitable after costs.
Key ideas
- Implied volatility declined in BTC and ETH during the period described.
- Out-of-the-money calls outperformed puts in volatility terms, shifting smiles toward calls.
- Rising futures yields and long-side funding were interpreted as signs of stronger bullish sentiment.
- BTC put skew had eased, while ETH skew varied by maturity and leaned more bullish at a longer tenor.
- The report provides descriptive snapshots without testing predictive value or trading performance.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.