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Bitcoin and Volatility

By:Michael "Dr. Data" Rechenthin

The cryptocurrency has typically seen more upside volatility

Below is a visual representation of bitcoin's price reaching above $60,000 alongside its implied volatility, depicted in red. Implied volatility reflects the anticipated price movement—higher implied volatility signals greater expected fluctuation, while lower implied volatility indicates less expected movement.

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Small caps are still the most volatile

Below, we are looking at the implied volatilities of the major equity indices.

2000 (IWM) - small caps

Nasdaq 100 (QQQ)—100 stocks with a tech-focus

S&P 500 (SPY)—500 mega caps

Dow Jones (DIA)—mega caps

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Looking at Skew

Below, we have three options skew graphs for different assets. Each illustrates the price of out-of-the-money (OTM) call options (in blue) and OTM put options (in red) as a function of the strike price. The vertical green dashed line indicates the last traded price for each underlying asset.

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Two trade ideas


1. GLD ($243) broken wing butterfly (NOV) $0.09cr

Gold has rallied to all time highs over the last couple of weeks with volatility continuing to expand, especially when looking at the call skew on the upside. Metals typically have call skew because of the embedded price floor (meaning the metal will likely hold a minimum value above zero). Playing for upside here with no downside risk using a broken wing butterfly, long 1x the 245, short 2x the 250, and long 1x the 260 calls for a net small credit.


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2. SMH ($249) broken wing butterfly (NOV) $0.09cr

SMH is a semiconductor exchange-traded fund (ETF) heavily weighted toward Nvidia (NVDA) at around 20%, with Taiwan Semiconductor (TSM), Broadcom (AVGO), and Advanced Micro Devices (AMD) adding another 25% total (45%-ish between those four). The space has bounced with NVDA back to near highs—if you think it might continue but don't want the downside risk, a BWB 1x/2x/1x 260/270/290 gives a high profit potential to new highs with no risk to the downside.


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