Podcast Summary
In this episode, the hosts are joined by Simon and June SEO from QCP Capital, a high-volume market maker. The discussion revolves around crypto derivatives, market repricing, and skew in 2023. The conversation also delves into the potential of Ethereum (ETH) and Bitcoin (BTC), the current market sentiment, and options trading strategies. The hosts and guests also discuss the concept of gamma and its potential impact on the market.
Key Takeaways
Understanding Market Repricing and Skew
- Shift in Trading Calls and Puts: The market has seen a shift from trading calls over puts to more trading puts over calls, indicating a change in market sentiment.
- ETH’s Hidden Opportunity: Greg from Amber data suggests that ETH has a hidden opportunity compared to Bitcoin, despite the belief that ETH options are overpriced.
- Return of Market Fear: The market has seen a return of fear, with a focus on discounting the calls. However, Simon believes that most negatives have been priced in and potential surprises may come on the upside.
Current Market Sentiment and Options Trading Strategies
- Upside Potential: There is a focus on the upside potential in the market, with people buying outright calls and call spreads, particularly for the October timeframe.
- Downside Protection: On the downside, there has been interest in put spreads, such as the September 23.5k to 24.5k put spread, which traded 600 times.
- Ethereum-Bitcoin Spreads: The Ethereum-Bitcoin spreads have continued to widen, with Ethereum trading at a premium to Bitcoin.
Understanding Gamma and Its Impact on the Market
- Gamma’s Market Impact: The concept of gamma can cause the market to remain sticky for an extended period of time before a trigger accelerates movement.
- Acceleration Potential: Any acceleration on the top side of the market in the next quarter could have significant weight behind it.
FTX’s Impact on the Market
- Overblown Reaction to FTX: The speaker believes that the reaction to FTX’s sell-off was overdone and that gradual selling by FTX would not have a major impact.
- FTX’s Strategy: The gradual selling of assets by FTX is likely a strategy to maximize AUM fees.
Sentiment Analysis
- Bullish: The podcast expresses a bullish sentiment towards the market, particularly towards Bitcoin and Ethereum. The hosts and guests believe in the upside potential of the market and see opportunities in outright calls and call spreads.
- Bearish: There is a bearish sentiment expressed towards ETH options, which are believed to be overpriced. However, this is balanced by the belief in ETH’s hidden opportunity compared to Bitcoin.
- Neutral: The podcast maintains a neutral sentiment towards the market repricing and skew, acknowledging the shift in trading calls and puts but not expressing a clear preference.
