Samneet Chepal Profile picture
Sep 26, 2020 6 tweets 3 min read Read on X
I've been looking at @deribit's #BTC option flow data. I'm always interested in exploring how the market is positioned on an aggregated greeks level. Fortunately, extracting the trade direction is possible using @deribit's API.
This analysis only looks at the previous 1000 trades which covers the past ~20 hours. Therefore, this doesn't take into consideration previous trades beforehand and is not entirely representative of market positioning. It's more like a quick glance of what is going on now.
Below is the aggregated delta exposure for the most recent 1000 #BTC option trades. This was calculated by taking the deltas of calls/puts and summing them up based on whether the option was bought or sold. Image
Similar chart here but for aggregated gamma exposure. Very curious to see what is going on with Sept. 28th - I can rationalize why gamma is large in magnitude due to its short maturity, but surprised to see this exposure on the downside. Image
And lastly aggregated vega exposure. Image
With enough historical trade data we can get a much better picture of where the market is positioned based on these greeks. It'll also make it easier to track dealer gamma as discussed in this report from @GoldmanSachs

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More from @samchepal

May 17, 2024
1. As one of the youngest and largest option liquidity providers in the market, the team at @Arbelosxyz is continually exploring efficient ways to trade volatility. A few days ago @joshua_j_lim shared a trade idea which profited from collapsing vols amidst choppy price action. This week, we'll evaluate various systematic volatility selling strategies in crypto. Full piece here: arbelos.xyz/quantitive-fra…
2. As a baseline, we can evaluate the P&L of selling weekly BTC delta-hedged straddles on @DeribitExchange. Overall the performance is not bad despite some steep drawdowns in 2020 / 2021. Image
3. In theory, it makes sense to sell vol when ATM IV trades at a rich premium to RV, quantified using the "VRP" ratio (ATM IV / RV). In our feature exploration, sorting the vanilla straddle P&L by this ratio shows a rapid cumulative P&L increase as the VRP crosses 1.00. This suggests that most of the strategy's P&L accrues when IV > RV.Image
Read 9 tweets
May 11, 2024
1. Thrilled to see that @Arbelosxyz is now public! I've had the privilege of collaborating with the team to conduct in-depth research in the crypto derivatives space, with one of our first pieces on analyzing yield strats on @pendle_fi. Dive into our findings here: arbelos.xyz/getting-to-kno…
2. DeFi interest rate markets face two primary challenges:

a) Absence of fixed maturity products
b) High volatility of interest rates

Both of these limitations make it difficult to justify allocating large sums of capital to DeFi interest rate markets. As a result, this is where Pendle as a protocol shines which allows considerable flexibility on how to trade yield.
3. Key components in Pendle's protocol include:
- PT: Principal Token
- YT: Yield Token
- PT + YT = the total value of the underlying asset.
Read 13 tweets
Mar 16, 2023
1. Recently came across this tweet which led me to think about 0DTE options strats in crypto markets.

Full writeup: samchepal.com/systematically…
2. Not investment advice - just for fun / educational purposes.
3. Over the past few months there's been a steady rise in 0DTE options trading in SPX. These are super short-dated and there’s a lot of gamma associated with these options. Nearly 40% of SPX option volume was 0DTE in Q2 2022 - this has raised concerns from JPM researchers. Image
Read 17 tweets
Jan 13, 2023
1. Over the past few day's we've noticed some massive trades on @DeribitExchange. Surprisingly some of these trades were executed against limit orders without using RFQs. This gave inspiration to build an order-book scanner which is now open-sourced: github.com/schepal/deribi…
2. The motivation for this whole project was due to some large whale deciding to trade 25k contracts of ETH-30JUN23-400-P on Jan 5/23. Digging into the details we can see this trader decided to sell these options against passive limit orders on Deribit.
3. It's interesting b/c this trader could have gotten much better execution by tapping an OTC desk or @tradeparadigm's RFQ platform. A possible reason is this trader wanted to be completely anon and not attract attention until after the trade was completed (h/t @VidiellaLaura)
Read 16 tweets
Apr 11, 2022
1. A few weeks ago we witnessed a duel between @stablekwon and @AlgodTrading in a public wager on LUNA's future price action. In this piece written with @tradeparadigm we analyze how this bet could be priced using options pricing theory + who got rugged on this trade…
2. Let’s briefly review the premise of the bet.

- @Algod believes LUNA < $88 1 year from now - if he's right he gets $1M
- @stablekwon believes LUNA > $88 1 year from now - if he's right he gets $1M
Read 26 tweets
Feb 4, 2022
1. Over the past few months, DeFi ecosystems have witnessed a surge in structured product platforms - notably option vaults. While the current yields on these vaults can be enticing, we take a closer look at the long-run performance of these strategies: research.ledgerprime.com/p/a-quantitati…
2. Let’s start with a brief overview of the DeFi options space - TVL in 2020 was virtually non-existent but blew up to nearly $1B at the start of 2022. This was primarily due to the surge of activity within the DeFi structured products space. Data Source: @DefiLlama
3. Most of these structured products revolve around covered call options. As a refresher, this strategy involves being long the underlying spot asset and selling a call. This effectively caps the upside price action in exchange for an option premium.
Read 21 tweets

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