Skip to content
All library documents

Using Volatility Smile Skew to Compare Bitcoin and Ether Option Tenors

Article Deribit Insights
Read the original

Summary

This commentary compares Bitcoin and Ether option volatility smiles at one-week and one-month expiries. It measures skew using the implied-volatility difference between 10-delta calls and puts, and also discusses the SABR rho parameter, where negative values indicate a put-leaning smile. In the reported market snapshot, short-dated skew had moved closer to neutral while one-month options still showed a stronger premium for downside puts.

The authors interpret the gap between the tenors as making one-month out-of-the-money calls look relatively inexpensive. Their evidence consists of historical skew comparisons and fitted smile parameters through late October 2022; it is a relative-pricing argument, not a tested trading strategy. The commentary also notes that Bitcoin option volatility was low compared with the S&P 500, but provides no details here on implementation, transaction costs, or subsequent performance. Its expectation of a possible rally is an opinion rather than a demonstrated forecast.

Key ideas

  • The commentary measures option skew with the implied-volatility gap between 10-delta calls and puts.
  • Negative SABR rho values indicate a volatility smile tilted toward out-of-the-money puts.
  • One-week Bitcoin and Ether skew had moved closer to neutral than one-month skew in the reported data.
  • The authors view one-month out-of-the-money calls as relatively cheap compared with puts and shorter-dated options.
  • The relative-value interpretation is based on historical comparisons and does not establish future returns.

Tags

CryptoOptionsVolatilityDerivatives pricing

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