Crypto Options Analytics, July 25th, 2021

Last week was a DVol futures trader dream!


Disclaimer: Nothing here is trading advice or solicitation. This is for educational purposes only.

Math minded people here, pardon any typos.

For best execution with multiple counter-parties and anonymity visit: Paradigm


DVOL: Deribit’s volatility index

(1 month, hourly)


(July 25th, 2021 - Short-term and Medium-Term BTC Skews - Deribit)

The volatility space was quite volatile over the past week.

Early in the week, BTC spot prices began trading below $30k, which sent traders in a panic.

Traders repositioned into puts. Put buying sent IV soaring higher, and skew into monthly low negative territory.

This proved to be a bear trap, as prices quickly recovered and the volatility space retraced all repricing.

Short-term and medium-term skews are now only slightly negative but the highest levels all month.

(July 25th, 2021 - Long-Dated BTC Skews - Deribit)

Long-term skews remain positive, although they did bounce around a few points with the rest of the markets.


(July 25th, 2021 - BTC’s Term Structure - Deribit)

The term structure was especially erratic this week.

The term structure flipped into backwardation early in the week as traders bought puts.

This repricing higher was lead by the short-dated options, both on the way up and the way back down.

We now ended the week right back where we started, with a steep Contango shape.


(July 25th, 2021 - BTC ATM & Skews for options 10-60 days out - Deribit)

ATM IV (left) jumped an impressive +20pts as the spot market tested prices below $30k. As prices recovered, IV quickly deflated lower again.

Option Skew (right) dropped down to monthly lows, only to end the week near monthly highs.


(July 25th, 2021 - BTC Premium Traded - Deribit)

(July 25th, 2021 - BTC’s Contracts Traded - Deribit)

We saw a large uptick in option volumes as traders repositioned their books, only to unwind their hedges later in the week.

Paradigm was responsible for a big share of the volume seen last week.

Pros use Paradigm to execute large option trades and complex multi-legged positions at clean prices; this is especially valuable in fast markets like those seen last week.


(July 25th, 2021 - BTC’s Volatility Cone)

Realized volatility was rather tame last week, compared to the IV market.

Notice that RV hasn’t shifted significantly compared to last week.

There was a slight uptick in RV but nothing especially dramatic.


(July 25th, 2021 - BTC’s 10-day Realized-, and Trade-Weighted-, Implied-Vol.-Deribit)

To highlight the divergence between IV and RV, the chart above shows the clear premium IV holds, compared to RV.

Notice that IV led the move higher last week as well; typically, large volatility events will be led by RV as opposed to IV, as seen in mid-May.


DVOL: Deribit’s volatility index

(1 month, hourly)


(July 25th, 2021 - ETH’s Skews - Deribit)

Ethereum didn’t see wild repositioning in skew last week, like we saw in BTC.

Short-term and medium-term skew are priced at monthly highs but still slightly negative.

(July 25th, 2021 - ETH’s Skews - Deribit)

Long-term ETH options have a steep call skew.


(July 25th, 2021 - ETH’s Term Structure - Deribit)

Although skew didn’t bounce around as much for ETH, the term structure did.

Like BTC, the ETH term structure flipped into backwardation early last week.

The move higher in IV was quickly faded back down and ETH’s term structure is right back to square one, a steep Contango shape.


(July 25th, 2021 - ETH’s ATM & Skews for options 10-60 days out - Deribit)

ATM IV (left) jumped significantly higher early in the week and then right back down.

Notice that ETH’s skew (right) was stable, despite the move higher in IV.

Although ETH’s skew didn’t move lower as IV exploded higher, it did rally to monthly highs as ETH’s IV dropped back down.


(July 25th, 2021 - ETH’s Premium Traded - Deribit)

(July 25th, 2021 - ETH’s Contracts Traded - Deribit)

ETH option volumes were tame last week.

This is consistent with the lack of significant repricing witnessed in ETH.

ETH didn’t experience significant panic early in the week.


(July 25th, 2021 - ETH’s Volatility Cone)

RV is relatively stable near the lower 25th percentile.

As ETH continues to consolidate, we expect RV to continue to remain low.


(July 25th, 2021 - ETH’s 10-day Realized -, and Trade-Weighted-, Implied-Vol.-Deribit)

IV does have a slight premium to RV for ETH, but nothing as significant as BTC’s.

We do expect the consolidation trade to continue, and both volatilities to continue to melt.