Jun 21, 2019

Throw Away Your Skew Model : BTC at 10K



BTC is about to break into 10K territory - or already did on some exchange by the time I finish this post  - the level we have not seen in over a year. As we approach this round number we will observe the usual phenomenon of price clustering around this level, as key psychological level switches from support to resistance.

I typically do not pay significant attention to technical indicators, however this one is really different. Price clustering around key powers of 10 - like hundreds, thousands, or 10 thousands have been observed and well studied. While I do not know how will this impact spot returns, I can certainly say that it will have significant effect on the distribution of prices, and for option traders this means skew.

I expect skew behave quite different than it was before around this level, as trades will primarily focus on the price, as opposed to return / vol covariance, or other skew factors. If you're currently an options market maker - this will get tricky. And if you are a trader of options I expect there will be many interesting opportunities in the coming week or two.

If you're interested in trading BTC or ETH options there is only one exchange that I will recommend - Deribit


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