What is the significance of these figures in the weekly derivatives report and how should they be interpreted?

Once again, the sharp edge of regulation has fallen from the sky, and central bank regulation of crypto asset trading has come so unexpectedly

Explosion Data

What is the significance of these figures in the weekly derivatives report and how should they be interpreted?

Although the size of this data is theoretically a simple positive correlation with the magnitude of price fluctuations during the corresponding period, there are still some details of this data that deserve attention.

One is that a very extreme concentration of positions blowing up often means that the price is moving in the opposite direction from the “mainstream view” despite the high level of market participation, and this situation needs to be watched for the possibility of a trend reversal in a unilateral market. If the price fluctuates dramatically within a short period of time, but the value of blowout is relatively limited, this will generally happen in the middle and late stages of a bear market with very low market participation, and this condition may also be a secondary reference for confirming the bottom.

However, such results need to be judged against historical performance, and not by using the value of a single large up/down burst, so we will try to track the burst data continuously in the future.

Position data

币世界-衍生品周报中这些数据有何意义,又该如何解读?
What is the significance of these figures in the weekly derivatives report and how should they be interpreted?

Whether it is futures or options, position values are a direct reflection of the market’s willingness to participate. However, given that long-short data is not strictly differentiated when total positions are counted, it is not possible to make a simple “overweight” judgment by the increase in positions. However, as the number of mature participants in the market gradually increases, as long as the market maintains sufficient volatility, the total positions “should” maintain a healthy growth momentum, and if the market falls sharply when the market goes bad, it should still be interpreted as an immature market.

Trading volume

What is the significance of these figures in the weekly derivatives report and how should they be interpreted?

Trading volume is a more intuitive response to market heat, the data is more “simple and brutal” than position data, and the market will often bring a peak in trading volume when there is a large-scale concentrated explosion, so from a short-term perspective the volume data reference value is limited. However, from a medium to long-term perspective, volume is also a key indicator of an overheated or extremely depressed market, and daily and even weekly volume averages compared to long-term historical performance can visually reflect what stage the market is in.

Futures Contracts Basis Differences

What is the significance of these figures in the weekly derivatives report and how should they be interpreted?

The basis spread is the difference between the spot price and the futures price at a particular point in time. If the spot price is lower than the futures price, the basis difference is negative; if the spot price is higher than the futures price, the basis difference is positive.

Generally, the basis spread will be negative, meaning that the spot price will generally be lower than the futures price, and this is also known as a positive market. This “premium” in futures prices is mainly due to the “time cost” of the outstanding contract. Conversely, if the basis spread is positive, it is called a reverse market, which means that the market expects higher near-term prices than forward prices. In general, the absolute value of the basis spread is larger for quarterly contracts, while perpetual contracts are more in sync with spot prices due to their non-delivery nature.

The crossing of the 0-axis for quarterly contracts is a point of interest, which means that most market participants have changed their judgments about the relative prices in the short and long term, in other words, it can be interpreted as a change in judgment about the trend direction, which may be a signal of a trend reversal. In addition to this, the emergence of a very large absolute value of the basis spread, which is rare in long cycles, may also signal a short-term inflection point.

Although the existence of basis spreads gives market participants theoretical arbitrage opportunities, given the current not-so-low fees on derivatives exchanges and the time wear and tear of the manual trading process, manual arbitrage (e.g. buying spot in the positive market while shorting futures) is not very feasible without extreme basis spreads.

(Achieved) Volatility and Implied Volatility

币世界-衍生品周报中这些数据有何意义,又该如何解读?
What is the significance of these figures in the weekly derivatives report and how should they be interpreted?

Realized volatility is the performance of an asset’s price volatility over time, so realized volatility depends entirely on the historical price volatility of the underlying asset.

Implied volatility, on the other hand, is an indicator that reflects the expected price volatility of the underlying asset over time, calculated by bringing some of the option’s data back into the B-S formula. In other words, a factor in implied volatility is known information about existing options, which is not calculated using the data of the underlying asset and can and only reflects the general expectations of market participants about the future volatility level of the underlying asset.

Although implied volatility is somewhat forward-looking, it does not directly guide trading and does not have a tendency to be long or short one-sided, as it is primarily an expectation of “volatility”. However, if there is a particularly large change in implied volatility in a unilateral market, it should be taken as an early warning signal for a change in the market.

It is also worth adding that although there is not much of a pattern to the volatility values, the data has a very strong deviation from regression expectations, and once there are extreme ups and downs and out of the main movement range in the medium to long term, the indicator will often be corrected very quickly, which is also a potential way of reference.

PCR

What is the significance of these figures in the weekly derivatives report and how should they be interpreted?

The put-call ratio in the options market is also known as the PCR value. The common PCR values are Volume PCR and Position PCR, which represent the ratio of the volume (or position) of a put option contract to the volume of a call option contract for a given underlying, and are generally used as a predictor of market sentiment and the movement of the underlying asset.

If the PCR value climbs to an extreme high, it indicates that the market is oversold and is actually a bearish signal; conversely, if the value is at an extreme low, it is a bearish warning signal that the market may be overbought and bearish for the future.

For both volume and position PCR indicators, volume PCR only considers the number of options traded within a certain period of time, which has a high timeliness and can quickly reflect changes in market sentiment and style, and is more suitable for short-term forward-looking expectations. Volume PCR, on the other hand, is calculated based on the total number of positions held at each point in time and is more stable in value, making it more suitable for capturing long-term trend changes.

Option Expiration
Most platforms currently offer BTC/ETH options contract products in current week, next week, current quarter, and next quarter types.

The current week contract refers to the contract for delivery on the Friday closest to the current trading day, the next week is the contract for delivery on the Friday of the week following the current trading day, while the delivery date of the quarterly contract is relatively more complicated to understand.

The current quarter contract is the last Friday of the nearest month in March, June, September and December, and the delivery date of this contract does not coincide with the delivery date of the outstanding current week / next week contract; while the next quarter contract is the last Friday of the second nearest month in March, June, September and December, and the delivery date of this contract does not coincide with the delivery date of the outstanding current week / next week / current quarter contract; while the next quarter contract is the last Friday of the second nearest month in March, June, September and December, and the delivery date of this contract does not coincide with the delivery date of the outstanding current week / next week / current quarter contract. The delivery date of this contract does not coincide with the delivery date of the current week / next week / current quarter contract.

As an example of the so-called “non-coincident delivery date”, it is easy to understand that normally, every Friday after settlement, a new contract is created for the following week, and the previous contract for the following week becomes the contract for the current week. However, in March, after the penultimate Friday settlement, the current quarter contract will only have two weeks left to expire, which is actually a sub-week contract, so it will not generate a sub-week contract, but a new sub-season contract, while the original sub-season contract will become the current quarter contract, and the original current quarter contract will become the sub-week contract. However, it is not a big problem if you don’t understand it, after all, the delivery date is confirmed when you buy an option contract, and it doesn’t change because of this change mentioned above.

Considering that the current share of the cryptocurrency options market is not very large, and the share of options that can complete the exercise only accounts for a portion of the contracts that expire, there are not many cases of extreme volatility in the market on the settlement date, but as the options market develops further, the quarterly contract settlement date should indeed be seen as a potential risk point. Since most centralized exchanges offer options products with a specific delivery time of 16:00 BST on the day of delivery, this point in time should also be taken into account.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/what-is-the-significance-of-these-figures-in-the-weekly-derivatives-report-and-how-should-they-be-interpreted/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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