Thread by @QCPCapital

1/ Here’s our market update! 👇
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Now, on to the thread! 🧵

2/ Last week, the desk took on the largest amount of option buying ever. And in spite of the spot rally post-FOMC, vols trickled lower

3/ This week, we continued to take on huge option buying flows (including the 22,500 ETH calls bought on Monday morning)

4/ Still vols have continued to slide

Without our constant bidding, vols would easily be 5-10% lower right now. We’ve been surprised at the massive volume of option selling across the board.

5/ We reckon the market is getting complacent as spot ranges compress in this 45,500 - 49,500 channel. And now would be a great time to buy some wings (far strikes).

6/ We maintain our view that there will be a squeeze (likely to the topside) as liquidity thins out into the holidays and into 2022. If this happens, owning wings would be very profitable.

7/ The post-FOMC rally allowed us to take profit on some of our long delta (long spot) and long gamma (short-term options) positions.

8/ And as usual, we turned super long gamma (short-term options) from winning most of the flow from the Defi options vaults (DOVs) on Friday (9 active DOV protocols in total now!*)

9/ Over the weekend, the long gamma was a real pain to manage. With spot stuck within 45,500 - 48,000, we bled a significant amount of theta (time decay).

Fortunately, the large buy flows on Monday morning neutralised the gamma and vega on our books.

10/ Now we are keeping very nimble. Long wings all round and short small ETH vol against long vol in the Altcoins (which is now a very long list from new DOVs such as AVAX, NEAR, SOL, mSOL, 1INCH, ADA and FTM).

* 9 active DOVs: @ribbonfinance @ThetaNuts @StakeDAOHQ @Tap_Finance @Katana_HQ @friktion_labs @chestfinance @Opium_Network @sirenprotocol