Derivatives Market Update - 2.20.2024
February 20, 2024

Volatility Markets - Overview

The question of possible upside continuation posed last week was unequivocally answered as Bitcoin surged past the significant resistance level of $50,000. While the vertical movement briefly paused since last Wednesday, current candle structure seems to indicate a bullish hold of the $52,000 price level. While BTC took a brief pause, ETH experienced a nearly 10% rise and appears poised to breach $3,000. Although a short-term pullback remains a possibility, all indicators point toward sustained upward pressure in the coming months.

ETH funding rates are catching up to BTC at roughly 14%, as futures’ annualized basis expands with recent price action. The options’ market structure also suggests increased activity in ETH. Ethereum implied volatilities are now finally above Bitcoin’s across all expiries and deltas. This has been quite a rarity in the previous year, and suggests that ETH vol markets are alive and well. Momentum persists in both BTC and ETH vols, with yet another upwards shift following the previous week’s 10 point rise. Shorter-dated vols currently sit around high 50s, while mid-late term vols hover around 62. If markets trend higher we can easily see both BTC and ETH back above 70 vol, so positioning one's portfolio appropriately now is certainly worth consideration.

Digging Deeper - Volume Analytics

Diagonal spreads coming in hot this week as traders are still likely selling further-dated upside to fund closer-dated upside. This position continues to be very equitable due to the skew / term structure observed in the market. It is a very sensible play, as (vertical) call spreads are cheaper than outrights and do still accomplish the goal, but still require premium up front, whereas diagonal spreads may be constructed at zero or even negative cost (yield premium).

BTC Combo Spread Volumes:

  • Call Spreads: 1,605.8 Contracts (23%)
  • Call Diagonal Spreads: 1,599.5 Contracts (22.9%)
  • Put Spreads: 930 Contracts (13.3%)

ETH Combo Spread Volumes:

  • Call Diagonal Spreads: 11,438 Contracts (22.7%)
  • Put Spreads: 9,662 Contracts (19.2%)
  • Call Spreads: 7,630 Contracts (15.2%)

BTC Volume

***Data and insights as of February 20th, 2024 12:00:00 UTC

ETH Volume

***Data and insights as of February 20th, 2024 12:00:00 UTC


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