Reading Crypto Option Flows Around the 2022 Ethereum Merge

Summary

This commentary reads Bitcoin and Ether options activity alongside spot prices, funding, realized volatility, and implied volatility during late August and early September 2022. It interprets positive put skew, negative perpetual funding, and limited implied volatility reaction to spot declines as signs of risk reduction and hedging. For Ether, it connects some negative funding to traders holding spot while shorting perpetuals in anticipation of the proof-of-work fork, and notes that the trade could become crowded and costly.

The author discusses call spreads and call flies as ways larger accounts expressed potential Merge upside without buying expensive outright calls. Later flow observations include Bitcoin put purchases, Ether call sales, strangles, and call spreads, which are used to infer hedging and directional expectations. The commentary cites specific trades and volatility comparisons, but gives no systematic dataset, execution details, or subsequent performance. Option flow is interpretive evidence: reported trades do not reveal traders’ full positions or establish a reliable forecast.

Key ideas

• Positive put skew and negative funding are interpreted as signs of defensive positioning during spot weakness.
• Some negative Ether funding is attributed to spot holdings hedged with short perpetual positions around fork speculation.
• Call spreads and call flies can express upside views while limiting the cost of outright calls.
• Reported put purchases and call spreads are used to infer hedging and changing sentiment in Bitcoin and Ether.
• Trade-flow commentary is suggestive, but it does not establish traders’ complete exposures or predict outcomes reliably.

Tags

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