Date: 8th July 2021
Bitcoin rallies have been meeting stiff resistance at $36,000 levels on the upside. On the downside $33,000 has been providing strong support as price continues to trade rangebound. Option markets on Delta are signaling a 30% chance of Bitcoin ending above $37,000 and a 28% chance of it ending below $29,000 by the end of July.
Gamma exposure is highest at $32,000 strike and at $40,000 strikes. These levels should thus act as strong barriers but a break through them can see sharp moves on the downside and on the upside respectively.
For July, Open Interest remains highest for $30,000 strike Puts and $40,000 strike Calls as traders write this range to collect the premiums. Implied volatility continues to trade richer than the realized volatility. We have seen this trend for a few weeks now. If Bitcoin manages to hold the bottom end of the current range convincingly, then one can expect strong range selling activity and IVs getting crushed. 7 day IV is at 87%, while the RV is at 74%.
On the longer dated maturity, Calls are still trading at a slight premium to the Puts but on the shorter dated maturities, starting from 1 week to 1 quarter, Puts are richer signaling strong demand for protection and fear or further downside risk.
Overall Bitcoin continues to consolidate in a tight range for now but with a downward bias.
Trade Bitcoin Options on Delta.
Ether is trading around $2100 after getting rejected at around $2400 levels. Options market is still ascribing a 40% probability of ETH finishing above $2400 by the end of July. On the downside market is quoting 20% probability that ETH will end below $1800. Implied volatility for ETH is trading at about parity to the realized volatility. The short-term skew for Ether is trading negative, just as for Bitcoin, given the fear in the market of further downside in the near term.
$2000 puts and $2400 calls saw mixed flows but there was some buying in the out of the money $3200 strike. For July highest OI is around $1600 on the downside and $3000 on the upside. This should act as the range for Ether for this month.
$2000 remains key level with highest gamma exposure on the Puts side. On the Calls side $2400 has the highest gamma exposure.
Just as Bitcoin, Ether too should continue to trade range bound in the coming weeks.
Trade Ethereum Options on Delta.
Date: 2nd July 2021
As the last rally was rejected around $36K, BTC trades back around the $34k level. For the end of July expiry we see highest OI in $25K Puts and $40K Calls. Delta quotes give a 36% chance of $38K and 28% chance of $30K by the end of July. Last week saw a 34% chance of $40K and 20% probability of $28K with spot at $37K.
$34K is a key level for accelerated moves to the up- or downside with highest gamma exposure for both puts and calls. Traders are selling upside in $36K and $45K Calls; Puts are bought in at $32K, bought and written in $30K. Long term Call skew hovers above zero and shows fear of downside in the short to mid term. 7 day IV (92%) is lower than realized volatility (120%).
As spot trades lower, the market has yet to find its footing. OTM calls are sold, puts are in demand with some selling of downside protection at elevated volatility levels. As long as players write upside exposure in size a rangebound play with more downside risk seems likely.