Using Relative Bitcoin and Ether Volatility to Assess Option Value

Summary

The newsletter uses Bitcoin’s options market as a benchmark for judging whether Ether volatility is expensive. It considers macroeconomic conditions, Bitcoin’s recent trading range, realized volatility, and the probability of reaching a higher year-end price. The author judges Bitcoin options roughly fairly priced or potentially expensive, then compares Ether’s implied volatility with Bitcoin’s and examines the relative cost of Ether call options.

The case for fading Ether volatility rests on its elevated volatility relative to Bitcoin, expensive call wings, a high volatility risk premium, weak realized volatility after an earlier approval-driven price move, and call-overwriting flows. The author expects those flows to weigh on implied volatility and potentially restore positive dealer gamma. This is a market opinion supported by cited charts and observed flows, not a documented backtest. The newsletter also notes macroeconomic uncertainty and distinguishes a short- to medium-term volatility view from a more favorable long-term case for relative Ether volatility. The views are time-specific and do not establish that the trade will work in other conditions.

Key ideas

• Bitcoin option pricing provides a benchmark for assessing relative Ether volatility.
• The author considers Bitcoin’s implied pricing fair to expensive given the expected pace of a potential rise.
• Ether volatility and its call wing are described as expensive relative to Bitcoin and Ether’s realized volatility.
• Call-overwriting activity is presented as a potential source of downward pressure on Ether implied volatility.
• The short-term volatility thesis differs from the author’s more constructive long-term view.

Tags

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