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Reading BTC and ETH Options Skew Through Volatility Smiles

Article Deribit Insights
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Summary

This commentary compares the volatility smiles of BTC and ETH options, focusing on the relative implied volatility of out-of-the-money puts and calls. It uses the SABR rho parameter and the 25-delta risk reversal as measures of skew. Both markets showed greater implied volatility for puts than calls, a pattern associated in the article with demand for downside protection and pessimistic sentiment.

ETH’s skew was stronger than BTC’s, with the gap attributed to a higher implied volatility premium in ETH out-of-the-money puts; call implied volatility was described as similar across the two assets. The article also notes that the divergence had widened and narrowed more than once over the preceding month, including around the post-Shapella rally. These observations describe options pricing at particular points in time. They do not establish future price direction or offer a tested strategy for trading the skew.

Key ideas

  • A volatility smile compares implied volatility across option strikes and can reveal relative demand for puts and calls.
  • BTC and ETH options both showed greater skew toward out-of-the-money puts than calls.
  • ETH’s stronger put skew was attributed to higher implied volatility in its out-of-the-money puts.
  • The reported divergence changed over time and should be treated as a market snapshot, not a forecast.

Tags

CryptoOptionsVolatilitySentiment

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