SignalPlus Volatility Column: The market enters a brief "calm period," and put spreads are very popular

2024-03-08 10:21:29

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In terms of digital currency, prices have temporarily stabilized after experiencing a significant V-shaped fluctuation yesterday. BTC and ETH have been slightly oscillating around 66000 and 3800 respectively during the day. The accumulated tension in the options market has been quickly released, causing short-term volatility to drop by more than 12% Vol, with the 7 D ATM IV indicator falling below the 7 D RV.

Yesterday (6 MAR), Federal Reserve Chairman Powell spoke, reiterating that interest rate cuts depend on the upcoming economic trends. The Fed needs to have more confidence in inflation before considering rate cuts, and he also mentioned potential significant adjustments to the banking capital reform plan. Fed's Kashkari stated that his baseline expectation is no further rate hikes, but if inflation proves to be more entrenched than expected, the Fed will first consider extending the duration of high interest rate policies, further stating that if the economy performs well, why cut rates? In terms of data, the U.S. ADP employment number for February recorded 140,000, marking the largest increase since December last year, with private enterprises adding 140,000 jobs, significantly higher than the pre-pandemic average of 50,000.

Source: SignalPlus, Economic Calendar

In the cryptocurrency sector, prices have temporarily stabilized after experiencing a significant V-shaped fluctuation yesterday. BTC and ETH have slightly oscillated around 66000/3800 during the day. The accumulated tension in the options market was quickly released, causing short-term volatility to drop by more than 12% Vol, with the 7 D ATM IV indicator falling below the 7 D RV. From the trading perspective, whenever the market enters such a "calm period," there tends to be a shift in trading distribution towards the medium to long term, and today is no exception. ETH saw a single transaction of 18750 ETH in a 3600 vs 4600 Long Call Spread for April 26, becoming the market focus, while many Sell Call Spread transactions for BTC have occurred for expirations after the end of March. Additionally, yesterday's sharp decline may have caught many off guard, and today's drop in IV has attracted the establishment of Put Spread positions concentrated around the end of March (e.g., BTC 65000 vs 60000), which can provide some protection for recent long positions.