Block Scholes X Bybit Crypto Derivatives Analytics Report (Sep 11, 2024): U.S. Election Debate Collides With Surging Volatility Premium

Our weekly crypto derivatives analytics report dives into macro events, the current state of crypto, and trading signals from spot trading volume and futures, options and perpetual contracts.

This week, derivatives markets have been focused on the upcoming U.S. election as the presidential debate concluded, with volatility for options expiring after November 5, 2024 priced at a significant premium compared to shorter-term options. Thus far in September, key events included the Federal Reserve's anticipated interest rate cuts, supported by falling inflation figures from August. The labor market remains a critical factor influencing the Fed's decisions.

In futures markets, there was little reaction to early September's spot price volatility, indicating a preference for longer-term positions. Open interest in perpetuals remained steady despite price fluctuations, suggesting lower leverage than previous sell-offs. In the options market, there’s strong demand for volatility exposure in the period following the U.S. presidential election, dominating long-term strategies.

Please check out some of the report’s highlights.

Futures Activity Mutes

Trade volumes for BTC and ETH were subdued during early September's spot price volatility. Steady open interest at the end of August indicates that traders prefer longer-dated expirations, particularly those that are post–U.S. presidential election on November 5, 2024. While BTC contracts dominated the last week of trading, ETH has gained some market share.

BTC Sees a Surge in Longer-Tenor Calls Post-Election

BTC options markets saw a surge in call option trade volume across longer-dated tenors, reflecting a bullish sentiment for expirations after the U.S. presidential election. Despite this, open interest is mainly in shorter-tenor OTM puts, indicating that traders are hedging against short-term downside risks. There’s also a noticeable dislocation in ATM volatility pricing around November 5, 2024, influenced by these market dynamics.

ETH Short-Term Call Options Take the Upper Hand

Unlike BTC's put-dominated positioning, ETH options markets currently have more outstanding call contracts, though upside exposure has decreased since the August 30, 2024 expiration. ETH implied volatility remains at a premium to BTC across all tenors, closely tracking recent realized volatility. Both ETH and BTC show a steepening term structure, as short-tenor volatility has reversed its early September gains. Overall, both markets reflect similar positioning in anticipation of upcoming macroeconomic uncertainty.

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