Implied vols continue to drift lower as BTC rebounds >10% from lows
Written by Dick Lo, Clement Cheng, and Janson Wang
Markets rebounded strongly from the lows seen on Tuesday after Elon Musk revealed at The B Word Conference that he personally owns Bitcoin (BTC), Ethereum (ETH) and Dogecoin (DOGE) while both Tesla and SpaceX holds Bitcoin. Musk also said that Tesla will likely accept Bitcoin for purchases again and that he is investing in cryptocurrencies for the long-term claiming “I might pump but I don’t dump”
Markets reacted swiftly and rebounded from a low of $29,278 on Tuesday to almost $33k before pulling back on Friday evening
Global regulatory pressure continues to mount on Binance as NatWest cuts payment channels to the largest crypto exchange citing regulatory uncertainty. Notably, the highly popular derivatives exchange FTX bought back its shares owned by Binance citing differences in business models and strategic directions while announcing that it has raised a whopping US$900 million series B at a US$19 billion valuation
Meanwhile, US equities hit yet another all-time high while investors question how long the party can last before expectations of tapering potentially triggers a market correction. TDX cautions clients that should a major risk-off correction take place in the equity markets, it is likely to lead to a correlated move in crypto markets and as always, we remind clients to be aware of the downside risks and implement hedging strategies as necessary
Volatility & Skew
Implied vols spiked briefly as BTC dipped below the key $30k level before resuming its downward trajectory as markets recovered. With technical resistance seen at $32,800 and the prospect of more rangebound action, implied vols could continue to drift lower
TDX has been running a short vega / long skew book but will gradually move towards being vol neutral as implieds continue to trend lower while maintaining long skew for protection
Trading Strategies
While markets rebounded strongly on the back of positive comments from The B Word Conference as well as a recovery in equities, prices have thus far struggled to break through technical resistance to invalidate the downtrend. We have been looking at various strategies to protect against / profit from another potential pullback:
- 30-July $29k/$28k/$27k Put Butterfly at a cost of 0.45% with a potential maximum payout of 3.5% if prices settle at $28k
- 13-Aug $28k/$36k Risk Reversal at zero cost, providing full protection if BTC prices drop below $28k while capping the upside at $36k, a level not seen since the end of June
Contact Us
If you liked the above trading ideas and would like to explore further, please click any of the links below:
Email: trading@tdx-strategies.com
Website: www.tdx-strategies.com/
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