Podcast Summary
This episode of “The Big Picture” features guests Greg and Marty, and Kelly Greer from Galaxy Digital. The discussion revolves around the recent market selloff, the impact on the volatility surface, and the anticipation of ETF approval. The panel also delves into the analytics and trading dynamics in the crypto market, particularly in relation to options trading.
Key Takeaways
Market Selloff and Volatility
- Open Interest Buildup: Greg shares a chart showing the recent price action and open interest buildup on Binance, indicating the establishment of long positions and highlighting the liquidations that occurred during the recent market selloff.
- Volatility Surface Impact: The selloff’s impact on the volatility surface is discussed, with a focus on the put skew becoming more symmetrical and the limited reaction in implied volatility.
Anticipation of ETF Approval
- Market Reset: The panel discusses the significance of the selloff and the importance of a market reset before potential ETF approval. They mention the need for a flush out of leveraged long positions.
- Volatility and Options Pricing: The growing anticipation and excitement leading up to the ETF approval is reflected in volatility and options pricing, according to the panel.
Options Trading Dynamics
- Options Contracts Expiration: The expiration of options contracts shows that 60% of the open interest that rolled off were calls, reflecting a shift in the US appetite towards call options.
- Trade Strategy: A suggested trade strategy is to buy the $40,000 put for Jan 12th expiration and sell the $47,000 call to hedge risk and maintain a long Delta bias.
DeFi Space and Overwriting
- Call Buying Trend: In the DeFi space, there is a trend of outright call buying, with less complex or multi-leg strategies being used.
- Decreased Interest in Overwriting: The interest in overwriting has decreased, with some traders selling puts and more demand to buy calls and call with ksku being steeper at the start of the year.
Sentiment Analysis
- Bullish: The skew chart analysis shows a return to call bias after the selloff, indicating a bullish sentiment in the options market. The panel also expresses their optimism for the future of the crypto market and the potential impact of the ETF approval.
- Neutral: Despite the recent market selloff, Kelly highlights the lack of panic in the options market, with more demand for upside options than downside protection. This suggests a balanced view in the market.
