Data analysis: options market transactions are very active, call option premiums are obvious

The options market gave a strong response to the rise in currency prices, and the premium for implied volatility indicates that investors are very optimistic about the trend of spot prices.

The spot price of Ether did not stop after hitting $3,000, and in the first week of May, the spot price of Ether made another upward push, and as of this writing, Ether has managed to hit $4,100. The options market has given a strong response to the rise in the coin’s price, with the implied volatility premium indicating that investors are very optimistic about the movement of the spot price.

There has been a clear change in market style over the past month, as the digital asset market has begun to see a group “trading down”, with new buying forces favoring smaller coins amid the trend of increasing USD stablecoin offerings. Certain digital assets with similar characteristics (Doge, Shib, etc.) have seen their own bull market, and the “heat but not value” investment strategy has yielded good returns in the past week.

To summarize the data from the options market last week, we found that

  • The options market was very actively traded with significant call option premiums.
  • Bitcoin has been trading sideways for nearly 2 months and long-term holders still have solid optimistic expectations.
  • Ether implied volatility is up and market volatility is picking up.

Bitcoin
Bitcoin has successfully repaired its value after the decline, with its spot price hovering around $58,000. Bitcoin options volume has remained high over the past seven days, both from a contractual and a premium caliber.

Data analysis: options market transactions are very active, call option premiums are obvious

Bitcoin options premium volume (left) vs. bitcoin options contract volume (right), as of May 10, 18:00, source: gvol.io

After a downward correction and value repair, the short- to medium-term implied volatility surface continues to hold a clear rightward bias pattern, with calls being traded at a premium indicating that traders have more optimistic expectations for bitcoin spot prices.

Data analysis: options market transactions are very active, call option premiums are obvious

Bitcoin options short- and medium-term implied volatility surface change, as of May 10 18:00, source: gvol.io

Despite the thunder stolen by ethereum, long-term investors hold a firm view on the long-term investment value of bitcoin, and the bitcoin forward options implied volatility surface is performing optimistically.

Data analysis: options market transactions are very active, call option premiums are obvious

Bitcoin options forward implied volatility surface, as of May 10, 18:00, source: gvol.io

According to the latest data from Glassnode, longtime bitcoin holders were back in “hoarder” mode in April of this year, and after several downside tests, bitcoin appears to be on solid footing at $50,000. During the last market correction, many investors believed that bitcoin was overvalued and that its downside risk would put some constraints on the prices of other digital assets. For now, the consensus on bitcoin’s value appears to remain firm and investors need not be overly concerned about its downside risk.

Data analysis: options market transactions are very active, call option premiums are obvious

Change in net position of long-term bitcoin holders, source: Glassnode

Last week, we mentioned that the term structure of bitcoin implied volatility had an extremely flat curve pattern. However, with the overall rise in market volatility, the steepness of the term curve is deepening, with December 31 being the “Rich Point” of highest volatility.

Data analysis: options market transactions are very active, call option premiums are obvious

Bitcoin options implied volatility term structure as of May 10, 18:00, source: gvol.io

Observing from higher-order data, Bitcoin implied volatility for bitcoin in-value options has increased compared to last week, returning to around 80. Looking at the skewness data, the skewness values for bitcoin options are already in the positive range, with a significant call option premium.

Data analysis: options market transactions are very active, call option premiums are obvious

Bitcoin options implied volatility (left) vs. skewness (right) change over the past 1 month, as of May 10, 18:00, source: gvol.io

Historically the difference between ETH vol and BTC vol has been basically around 20 vol. With the BTC vol handle itself rising from 50 to 80, the current 30 vol difference is actually still relatively cheap. As you can see from the ETH/BTC price action over the past month, ETH and BTC are decoupling more significantly – which means that buying ETH vol/sell BTC vol is still a valuable relative value strategy at this point – whether ETH continues to rise sharply or significant pullback occurs. — Daniel, COO of bitcom

Looking at volatility through the historical quantile charts, Bitcoin has not seen any unexpected price changes in the past week, and realistic volatility is around the historical median for different windows.

Data analysis: options market transactions are very active, call option premiums are obvious

Historical quantile chart of realistic volatility, as of May 10, 18:00, source: gvol.io

Looking at the historical changes in volatility, investors appear to have updated their psychological expectations for market volatility, with bitcoin’s implied volatility moving up again. As of this writing, bitcoin’s real volatility is essentially at the same level as implied volatility.

Data analysis: options market transactions are very active, call option premiums are obvious

Real volatility vs. implied volatility, as of May 10, 18:00, source: gvol.io

Ether
Thanks to the excellent coin price performance, the volume of Ether options was very active last week, and the strong market demand may provide better price support for Ether.

Data analysis: options market transactions are very active, call option premiums are obvious

Ether options premium volume (left) vs. Ether options contract volume (right), as of May 10, 18:00, source: gvol.io

Observing the implied volatility surface for Ether, the short- to medium-term implied volatility surface continues the right-skewed pattern from last week.

Data analysis: options market transactions are very active, call option premiums are obvious

Ether options short- and medium-term implied volatility surface, as of May 10, 18:00, source: gvol.io

Data analysis: options market transactions are very active, call option premiums are obvious

Ether options forward implied volatility, as of May 10, 18:00, source: gvol.io

While the Bitcoin term curve has a “Contango” pattern, the term structure of Ether implied volatility has a “Back” structure, with divergent market sentiment causing their term curves to take on different patterns. The “Back” structure was formed when the near-end implied volatility was traded at a premium due to the optimistic expectations of investors for the short-window coin price increase as the market sentiment of Ether was too hot. Investors are reminded that it has only been 10 days since Ether broke $3,000.

Looking at the term curve of Ether implied volatility, the pattern shows a certain hump pattern, with June options showing a significant volatility premium.

Data analysis: options market transactions are very active, call option premiums are obvious

Ether options implied volatility term structure, as of May 10 18:00, source: gvol.io

With the big rally in ETH spot, the June-Sep term structure we could see 2 weeks ago has gone from a steeper contango to the current backwardation. This makes buying September/selling June ETH vol now a very good relative value strategy – of course given the high volatility of ETH, it is better to build this term structure strategy with Strangle than Straddle. — Daniel, COO of bitcom

Looking at the higher order data, the implied volatility of Ether in-the-money options has increased again and the skewness is at a 30-day high, so the rally still doesn’t seem to be over.

Data analysis: options market transactions are very active, call option premiums are obvious

Ether options implied volatility (left) vs. skewness (right) over the past 1 month, as of May 10, 18:00, source: gvol.io

Looking at the historical quantile chart, Ether’s realistic volatility is in the 75% historical quantile range in almost all windows.

Data analysis: options market transactions are very active, call option premiums are obvious

Real volatility historical decile chart as of May 10, 18:00, source: gvol.io

As mentioned last week, Ether implied volatility showed some discount to real volatility, when the entry ($3,200) didn’t even seem too late. During this week, the discounted space of implied volatility has been traded off due to the correction of investors’ consensus expectations for the coin’s price. Looking at the image we can see that Ether’s implied volatility is now at a premium to real volatility and expectations have moved ahead of value.

Real volatility versus implied volatility as of May 10, 18:00, source: gvol.io

Conclusion
The Fed’s dovish attitude has been evident in recent FOMC meetings, and from what has been disclosed, the Fed wants to maintain an accommodative environment in the markets and mitigate investor fears of higher interest rates. If monetary policy is not transformed into a real “Taper” (raising the benchmark interest rate and reducing the size of bond purchases), then “nominal inflation” is difficult to form an effective suppression of digital asset markets. As the chart shows, the steepening curve tells us that liquidity in the digital asset market is expanding at an accelerated rate, and perhaps the bull market is not yet at its wildest.

Data analysis: options market transactions are very active, call option premiums are obvious

Change in size of stablecoins, data source: Glassnode

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/data-analysis-options-market-transactions-are-very-active-call-option-premiums-are-obvious/
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