TDX Weekly Options Digest — April 9, 2021
Year-to-date low levels of volatility, is an outsized move just around the corner?
After numerous failed attempts to break and hold the $60k level, Bitcoin (BTC) has been stuck in a $55,000 — $60,000 for about two weeks.
On a brighter note, Ethereum (ETH) powered to an all-time high of just above $2,150, possibly on the back of optimism over the upcoming upgrade which addresses the high network fees and transaction speeds — arguably the main issues that have been holding back ETH. The bullish sentiment on ETH is reflected in better bids on short dated upside call options.
Alt season is in full swing with Bitcoin dominance dropping to almost a two-year low. Major theme of the week has been the resurgence of dinosaur coins including XRP (+76%), EOS (+31.5%), XTZ (+30.7%) and LTC (13.7%) which have all performed strongly since the start of April.
With implied vols at levels not seen for quite some time, TDX continued to see interest in buying downside protection on BTC.
Alt coin interest continues to be strong with bullish requests on FTX Token (FTT), Binance Token (BNB) and Huobi Token (HT) ahead of the long-awaited Coinbase listing and with Kraken also announcing its intention to go public in 2022.
Out of the left field, TDX also had interest on Filecoin (FIL) put options.
Front month at-the-money implied volatilities for BTC options declined about 10% from the previous week while the drop was about 15% for ETH options.
While implied volatilities have been under pressure with BTC trading in a tight range, TDX advises clients not to be complacent and to be well-prepared for a breakout in either direction.
BTC options are showing close to zero skew for options in April, while skew continues to be negative for longer dated expiries (in other words, upside calls are still better bid than downside puts).
ETH implied vol rebounded temporarily after new highs were reached before continuing on its downward path.
Trading Strategies to consider:
Sell in May and go away? While May is still weeks away, given the relative low levels of implied volatilities, it may not be a bad time to start looking at putting in place some downside protection for when (not if) volatility inevitably returns to the market. Contact the desk for low-cost downside protection that will help you sleep better at night.
Considering the recent incredible out-performance of alts, we are again looking at using index put options as proxy hedges for client portfolios (for example, put options on DeFi-PERP traded on FTX as a hedge for DeFi exposure). Contact the desk to discuss potential structures tailor-made for you.
TDX DeFi Yield Generator had another strong week, generating 52.36% APR on USD stable coins for our clients. Let TDX do the hard work of yield farming for you and earn enhanced returns on your idle stablecoins.
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