Trading Crypto Volatility and Skew During the FTX Shock

Summary

This commentary describes crypto options markets during the volatility surge associated with FTX’s insolvency. It reports sharp declines in BTC, ETH, and SOL alongside higher implied volatility, pronounced put demand, and elevated volatility across both short and long maturities. The author then outlines two options positions: buying a short-dated, delta-hedged ETH call to participate in volatility and a possible rebound, and selling longer-dated calls while buying shorter-dated puts to express expected normalization while retaining downside protection.

The examples explain the rationale in terms of takeover headlines, an upcoming US inflation release, volatility sales on rallies, and perceived demand for protection. They are discretionary trade ideas, not a backtested method or a complete risk framework. The commentary gives selected option prices and implied-volatility levels, but no realized results, sizing guidance, hedge rebalancing rules, or quantified loss limits. Its market views are specific to the crisis conditions described, and the document’s own disclaimer says the material is informational rather than investment advice.

Key ideas

• The FTX insolvency shock coincided with falling crypto prices and a sharp rise in implied volatility.
• A short-dated delta-hedged ETH call was proposed as a way to gain from continued volatility and a possible rebound.
• A short-volatility position in longer-dated calls was paired with short-dated puts for downside protection.
• The suggested trades rely on discretionary expectations about catalysts, volatility normalization, and demand for hedges.
• The commentary gives no backtest, sizing rules, or measured trade outcomes.

Tags

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