• Home
  • Cryptocurrency
    • Bitcoin
    • Ethereum
    • XRP
    • Litecoin
    • Altcoin
    • Cardano
    • Tether
    • DOGE
    • Solano
    • XLM
    • DOT
    • XDC
    • SHIBA
    • BNB
    • Ape
    • HBAR
    • QNT
  • Blockchain
  • Regulation
  • Market
  • Live
    • Prices
    • ICO
  • Meta
    • NFT
  • Technical Analysis
    • XRP
    • BTC
    • XLM
    • ADA
    • TETHER
    • ETC
    • ETH
    • DOGE
    • LTC
  • Exchange
  • Mining
Friday, June 2, 2023
  • Login
  • Register
Coin24h.com
  • Home
  • Cryptocurrency
    • Bitcoin
    • Ethereum
    • XRP
    • Litecoin
    • Altcoin
    • Cardano
    • Tether
    • DOGE
    • Solano
    • XLM
    • DOT
    • XDC
    • SHIBA
    • BNB
    • Ape
    • HBAR
    • QNT
  • Blockchain
  • Regulation
  • Market
  • Live
    • Prices
    • ICO
  • Meta
    • NFT
  • Technical Analysis
    • XRP
    • BTC
    • XLM
    • ADA
    • TETHER
    • ETC
    • ETH
    • DOGE
    • LTC
  • Exchange
  • Mining
No Result
View All Result
  • Home
  • Cryptocurrency
    • Bitcoin
    • Ethereum
    • XRP
    • Litecoin
    • Altcoin
    • Cardano
    • Tether
    • DOGE
    • Solano
    • XLM
    • DOT
    • XDC
    • SHIBA
    • BNB
    • Ape
    • HBAR
    • QNT
  • Blockchain
  • Regulation
  • Market
  • Live
    • Prices
    • ICO
  • Meta
    • NFT
  • Technical Analysis
    • XRP
    • BTC
    • XLM
    • ADA
    • TETHER
    • ETC
    • ETH
    • DOGE
    • LTC
  • Exchange
  • Mining
No Result
View All Result
Coin24h.com
No Result
View All Result
Ledger Nano X - The secure hardware wallet
ADVERTISEMENT

Bitcoin Traders Say Options Market Understates Likelihood of Chaotic US Election

22 September 2020
in Market
Reading Time: 7 mins read
A A
0
189
SHARES
1.5k
VIEWS
Share on FacebookShare on Twitter
cryptotrader
ADVERTISEMENT


Cryptohopper
ADVERTISEMENT

The November U.S. presidential election could be contentious, yet the bitcoin market is pricing little event risk. Analysts, however, warn against reading too much into the complacency suggested by the volatility metrics. 

Bitcoin’s three-month implied volatility, which captures the Nov. 3 election, fell to a two-month low of 60% (in annualized terms) over the weekend, having peaked at 80% in August, according to data source Skew. Implied volatility indicates the market’s expectation of how volatile an asset will be over a specific period. 

Bitcoin’s expected volatility over the next few months, as implied by the options market, has been falling.
Source: Skew.

The one- and six-month implied volatility metrics have also come off sharply over the past few weeks. 

The declining price volatility expectations in the bitcoin market cut against growing fears in traditional markets that the U.S. election’s outcome may not be decided for weeks. Traditional markets are pricing a pickup in the S&P 500 volatility on election day and expect it to remain elevated in the event’s aftermath. 

“Implied volatility jumps around election day, pricing an S&P 500 move of nearly 3%, and the term structure remains elevated well into early 2021,” analysts at investment banking giant Goldman Sachs recently said. 

One possible reason for the decline in bitcoin’s volatility expectations ahead of the U.S. elections could be the leading cryptocurrency’s status as a global asset, said Richard Rosenblum, head of trading at GSR. That makes it less sensitive to country-specific events. 

“The U.S. elections will have relatively less impact on bitcoin compared to the U.S. equities,” said Richard Rosenblum, head of trading at GSR. 

Implied volatility distorted by option selling

Crypto traders have not been buying the longer duration hedges (puts and calls) that would push implied volatility higher. In fact, it seems the opposite has happened recently. “In bitcoin, there has been more call selling from overwriting strategies,” Rosenblum said. 

Call overwriting involves selling a call option against a long position in the spot market, where the strike price of the call option is typically higher than the current spot price of the asset. The premium received by selling insurance (or call) against a bullish move is the trader’s additional income. The risk is that traders could face losses in the event of a sell-off.

Selling options puts downward pressure on the implied volatility, and traders have recently had a strong incentive to sell options and collect premiums. 

“Realized volatility has declined, and traders holding long option positions have been bleeding. And to stop the bleeding, the only option is to sell,” according to a tweet Monday by user @JSterz, self-identified as a cryptocurrency trader who buys and sells bitcoin options.

btc-realized-vol
Bitcoin’s realized volatility dropped earlier this month but has started to tick back up.
Source: Skew.

Bitcoin’s 10-day realized volatility, a measure of actual movement that has occurred in the past, recently collapsed from 87% to 28%, as per data provided by Skew. That’s because bitcoin has been restricted mostly to a range of $10,000 to $11,000 over the past two weeks.

A low-volatility price consolidation erodes options’ value. As such, big traders who took long positions following Sept. 4’s double-digit price drop may have sold options to recover losses. 

In other words, the implied volatility looks to have been distorted by hedging activity and doesn’t give an accurate picture of what the market really expects with price volatility. 

Moreover, despite the explosive growth in derivatives this year, the size of the bitcoin options market is still quite small. On Monday, Deribit and other exchanges traded roughly $180 million worth of options contracts. That’s just 0.8% of the spot market volume of $21.6 billion. 

Activity concentrated at the front-month contracts

The activity in bitcoin’s options market is primarily concentrated in front-month (September expiry) contracts. 

Over 87,000 options worth more than $1 billion are set to expire this week. The second-highest open interest (open positions) of 32,600 contracts is seen in December expiry options. 

btc-options-open-interest-by-expiry-2
Bitcoin options open interest by expiry.
Source: Skew.

With so much positioning centered around the front end, the longer-duration implied volatility metrics again look unreliable. Denis Vinokourov, head of research at the London-based prime brokerage Bequant, expects re-pricing the U.S. election risk to happen following this week’s options expiry. 

Spike in volatility does not imply a price drop

A re-pricing of event risk may happen next week, said Vinokourov. Still, traders are warned against interpreting a potential spike in implied volatility as an advance indicator of an impending price drop as it often does with, say, the Cboe Volatility Index (VIX) and the S&P 500. That’s because, historically, bitcoins’ implied volatility has risen during both uptrends and downtrends. 

The metric rose from 50% to 130% during the second quarter of 2019, when bitcoin rallied from $4,000 to $13,880. Meanwhile, a more significant surge from 55% to 184% was observed during the March crash. 

Since that massive sell-off in March, the cryptocurrency has matured as a macro asset and could continue to track volatility in the stock markets and U.S. dollar in the run-up to and post U.S. elections. 



Source link

Related articles

U.S. CFTC May Change Risk Rules in a Way That Could Consider Crypto

U.S. CFTC May Change Risk Rules in a Way That Could Consider Crypto

2 June 2023
Tether Market Cap Climbs to All-Time High of $83.2B, Even as Stablecoin Market Sinks

Tether Market Cap Climbs to All-Time High of $83.2B, Even as Stablecoin Market Sinks

1 June 2023
[crypto-donation-box]
Tags: BitcoinChaoticElectionLikelihoodMarketOptionsTradersUnderstates
Share76Tweet47
Ledger Nano X - The secure hardware wallet
Previous Post

India’s largest bank joins RippleNet

Next Post

Bitcoin “Should Be A Primary Beneficiary” Post Pandemic

Related Posts

U.S. CFTC May Change Risk Rules in a Way That Could Consider Crypto

U.S. CFTC May Change Risk Rules in a Way That Could Consider Crypto

2 June 2023
0

“These technological advancements, with their accompanying risks, necessitate the commission revisiting our regulatory oversight, including our risk management requirements,” Goldsmith...

Tether Market Cap Climbs to All-Time High of $83.2B, Even as Stablecoin Market Sinks

Tether Market Cap Climbs to All-Time High of $83.2B, Even as Stablecoin Market Sinks

1 June 2023
0

USDT has reached a $83.2 billion market capitalization, recovering all its losses since the implosion of blockchain project Terra more...

Bitcoin Lingers Under $27K to Continue Its May Sluggishness Amid Inflation Concerns

Bitcoin Lingers Under $27K to Continue Its May Sluggishness Amid Inflation Concerns

1 June 2023
0

BTC and ether both lost ground in May, the first monthly decline of 2023. LTC and RNDR were among the...

Litecoin Price (LTC) Starts June Strong as Investors Eye August Halving, Uptick in Activity

Litecoin Price (LTC) Starts June Strong as Investors Eye August Halving, Uptick in Activity

1 June 2023
0

Litecoin is a lot cheaper in terms of units compared to bitcoin, which attracts investors looking to position themselves ahead...

CoinDesk Turns 10: 2022 – How Crypto Gods Turn Into Monsters

CoinDesk Turns 10: 2022 – How Crypto Gods Turn Into Monsters

1 June 2023
0

On Nov. 2, 2022, Ian Allison’s revealed the weak balance sheets of the FTX-affiliated trading firm Alameda Research, which started...

Load More
Next Post

Bitcoin "Should Be A Primary Beneficiary" Post Pandemic

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

We publish a comprehensive news feed covering all news relevant to the crypto user, covering main industry news, politics and regulation as well as consumer-level “news you can use” (practical stuff), including handy DIY tips, links to useful tools, unbiased reviews and opinions revolving around cryptocurrency. Simple logic and real-world examples are preferred before technical jargon and personal rants.

Categories

  • Altcoin
  • ApeCoin
  • Bitcoin
  • Blockchain
  • BNB
  • Cardano
  • Cryptocurrency
  • DOGE
  • DOT
  • Ethereum
  • HBAR
  • Litecoin
  • Market
  • Meta News
  • Mining
  • NFT
  • QNT
  • Regulation
  • SHIBA
  • Solano
  • Tether
  • Uncategorized
  • XDC
  • XLM
  • XRP

What’s New Here!

  • U.S. CFTC May Change Risk Rules in a Way That Could Consider Crypto
  • Bitcoin BTC Price Has Reached ‘a General Accumulation Phase’: Analyst
  • Mooners and Shakers: Litecoin gains while Bitcoin slips; Binance Australia updates banking situation

Newsletter

  • About Us
  • Privacy Policy
  • Contact Us

© 2022 coin24h.com

No Result
View All Result
  • Home
  • Cryptocurrency
    • Bitcoin
    • Ethereum
    • XRP
    • Litecoin
    • Altcoin
    • Cardano
    • Tether
    • DOGE
    • Solano
    • XLM
    • DOT
    • XDC
    • SHIBA
    • BNB
    • Ape
    • HBAR
    • QNT
  • Blockchain
  • Regulation
  • Market
  • Live
    • Prices
    • ICO
  • Meta
    • NFT
  • Technical Analysis
    • XRP
    • BTC
    • XLM
    • ADA
    • TETHER
    • ETC
    • ETH
    • DOGE
    • LTC
  • Exchange
  • Mining

© 2020 coin24h.com

Welcome Back!

Login to your account below

Forgotten Password? Sign Up

Create New Account!

Fill the forms below to register

All fields are required. Log In

Retrieve your password

Please enter your username or email address to reset your password.

Log In
  • bitcoinBitcoin(BTC)$26,900.00-0.65%
  • ethereumEthereum(ETH)$1,873.630.05%
  • tetherTether(USDT)$1.00-0.14%
  • binancecoinBNB(BNB)$305.28-0.26%
  • usd-coinUSD Coin(USDC)$1.000.02%
  • rippleXRP(XRP)$0.511.18%
  • staked-etherLido Staked Ether(STETH)$1,871.76-0.05%
  • cardanoCardano(ADA)$0.368062-0.77%
  • dogecoinDogecoin(DOGE)$0.0718120.14%
  • matic-networkPolygon(MATIC)$0.900.68%
  • solanaSolana(SOL)$20.66-0.22%
  • litecoinLitecoin(LTC)$94.663.88%
  • tronTRON(TRX)$0.0752390.01%
  • polkadotPolkadot(DOT)$5.24-0.83%
  • binance-usdBinance USD(BUSD)$1.00-0.21%
  • shiba-inuShiba Inu(SHIB)$0.000008-2.24%
  • avalanche-2Avalanche(AVAX)$14.211.15%
  • daiDai(DAI)$1.000.02%
  • wrapped-bitcoinWrapped Bitcoin(WBTC)$26,920.00-0.73%
  • uniswapUniswap(UNI)$5.01-0.19%
  • leo-tokenLEO Token(LEO)$3.571.34%
  • chainlinkChainlink(LINK)$6.39-1.45%
  • cosmosCosmos Hub(ATOM)$10.39-0.10%
  • okbOKB(OKB)$45.87-0.62%
  • moneroMonero(XMR)$145.41-0.62%
  • ToncoinToncoin(TON)$1.77-3.28%
  • ethereum-classicEthereum Classic(ETC)$17.91-0.11%
  • stellarStellar(XLM)$0.091611-1.21%
  • bitcoin-cashBitcoin Cash(BCH)$114.251.14%
  • filecoinFilecoin(FIL)$4.883.52%
  • internet-computerInternet Computer(ICP)$4.741.90%
  • true-usdTrueUSD(TUSD)$1.000.08%
  • lido-daoLido DAO(LDO)$2.111.02%
  • AptosAptos(APT)$8.693.54%
  • quant-networkQuant(QNT)$115.90-0.74%
  • hedera-hashgraphHedera(HBAR)$0.050347-2.22%
  • ArbitrumArbitrum(ARB)$1.171.34%
  • crypto-com-chainCronos(CRO)$0.058747-1.78%
  • GGTKNGGTKN(GGTKN)$0.1121180.75%
  • vechainVeChain(VET)$0.019845-1.82%
  • nearNEAR Protocol(NEAR)$1.560.37%
  • the-graphThe Graph(GRT)$0.127103-5.39%
  • apecoinApeCoin(APE)$3.05-2.87%
  • algorandAlgorand(ALGO)$0.1502791.28%
  • the-sandboxThe Sandbox(SAND)$0.565.21%
  • paxos-standardPax Dollar(USDP)$1.000.37%
  • fraxFrax(FRAX)$1.000.41%
  • EdgecoinEdgecoin(EDGT)$1.00-0.03%
  • eosEOS(EOS)$0.89-0.25%
  • rocket-poolRocket Pool(RPL)$48.670.18%