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Markets

Options Market Prices Muted Volatility Into Quarter End

Implied volatility on front-month contracts has drifted toward the lower end of its two-year range, a positioning that leaves the market exposed to a shock.

SJSarah JenkinsPublished 5 min read

Thirty-day implied volatility on the most liquid bitcoin options has compressed to levels last sustained in early 2024, according to settlement data from the largest crypto options venue.

Volatility sellers have been rewarded for most of the summer, and several structured product desks have expanded covered-call issuance to meet demand for yield from allocators who hold spot exposure.

The risk in that positioning is well understood. Compressed implied volatility means hedges are inexpensive, but it also means a large share of the market is short convexity into any surprise.

Skew tells a more cautious story than the headline number. Downside puts remain bid relative to equivalent calls, a pattern that has persisted since the spring drawdown.

About the author

Sarah Jenkins

Markets Editor

Sarah Jenkins leads D2CA's markets desk, tracking fund flows, exchange-traded products and institutional trading behaviour. She previously covered equity derivatives for a global wire service and began her career as a fixed income analyst in London.

D2CA.org reports on digital asset markets. This article is journalism, not investment advice. Corrections and clarifications: see our corrections policy.