Gate Research Institute: BTC big dump ignites volatility premium, year-end options volatility strategy heats up

Market Overview

The Gate Research Institute stated that Bitcoin fell below $100,000 for the first time since June this week, hitting a low of $99,932 and breaking below the 200-day moving average, marking the second largest single-day drop of the year; Ethereum also briefly fell below $3,200 during trading, reaching its lowest level since August. This sharp decline was mainly driven by the dual impact of Powell's hawkish comments and the risk of a federal government shutdown. The Federal Reserve Chairman emphasized that interest rates may “remain high for a longer period,” weakening the market's expectations for a rate cut in December; meanwhile, the Treasury is accelerating the replenishment of the Treasury General Account ( TGA ), further tightening dollar liquidity and putting overall pressure on risk assets.

Options Market Dynamics

Latest data shows that the implied volatility (IV) of BTC is 48.11% and for ETH it is 75.56%, both significantly up from last week, reflecting an increase in market risk aversion and heightened volatility expectations. The near-month and far-month IV spread has returned to a rational range, indicating that the market's expectation for short-term volatility is becoming neutral. From the skew structure perspective, both BTC and ETH's 25-Delta Skew have quickly turned negative and the curve has steepened, indicating that investors are maintaining a defensive stance towards downside risks. BTC's realized volatility (RV) has risen to about 51, with the volatility risk premium (VRP = IV − RV) approaching the zero axis, showing that the market pricing for future volatility is relatively reasonable; ETH's RV has risen to about 77.23, with the VRP having peaked at 13.26 vol yesterday before falling back to 6 vol. Against the backdrop of improved risk appetite, implied volatility appears relatively overvalued, giving seller volatility strategies a relative advantage.

Block Trade Structure

This week in the BTC and ETH options market, there have been large trades executing short volatility strategies, indicating that investors are positioning for a bearish volatility strategy at a low cost. The two notable large trades are as follows:

• BTC: Buy BTC-281125-120000-C, sell BTC-261225-115000-C, to gamble on a moderate rise in the long term at a low cost and short the volatility, trading approximately 1200 BTC, with a premium income of about 2.3 million USD;
• ETH: Sell ETH-281125-2800-P and ETH-281125-4000-C to build a short volatility strangle strategy, trading a total of 3500 ETH, with a premium income of approximately 440,000 USD.

Platform Update

The Gate App options feature has been fully launched, supporting USDT-settled options for mainstream assets such as BTC, ETH, SOL, XRP, DOGE, TON, ADA, and LTC. It also provides cross-currency margin and portfolio margin mechanisms, significantly enhancing users' trading flexibility and capital efficiency.

Transaction details: https://www.gate.com/options/BTC_USDT