Traders are aggressively selling volatility via shorting $BTC and $ETH MOVE contracts on @Delta_Exchange Have shared some data around this with Coin Telegraph, please check out:https://t.co/D8fz4GI0tK — Pankaj Balani (@balanipankaj) April 16, 2020
On April 16, it has been reported that Move contracts worth $8 million were traded on the platform over the past 30 days. The platform also observed an additional $1 million worth of Ether (ETH) volatility tracking contracts traded during the same time period.
However, Pankaj Balani, the CEO of Delta Exchange, said:
“Whilst the first 2 weeks of March saw just over 1Mn worth of BTC MOVE contracts traded, this number was close to 2.5 Mn for the last 2 weeks. Since then, though the volatility has cooled off, volumes in the MOVE contracts are still high and over 4Mn worth of MOVE contracts have already been traded for the month of April. We are seeing the similar trends on ETH MOVE product too.”
According to Delta Exchange, this represents a 25% increase in trading volume for the contracts. Balani explained that why he believes traders are showing increased interest in the options.
“Traders are taking advantage of the high volatility environment and selling options. We saw strong selling in these products post Black Thursday as volatility spiked to as high as 250%. […] We are in a high volatility environment.”
Balani pointed out that Bitcoin’s volatility was about 40%-50% before the recent crash. After the crash concluded, the volatility increased fivefold. He concluded that now that the volatility decreased again, the contracts have once again become buyer dominated.
Also, he said that there are always two Move contracts for Bitcoin and two for Ether. One tracks the current and next day’s volatility, and the second starts trading when the current contract expires. Traders are allowed to set limit orders for the next day’s contract before matching starts.
“Having contracts listed ahead of time gives traders an opportunity to roll their positions from the current day to the next day right when the contract is launched.”
Moreover, Balani elaborated that the contract is just a call and a put option bundled together, as the contract is meant to make options trading easier for retail traders.
Thus, he continued:
“Trading a MOVE contract is like trading a futures contract on the absolute movement in price of BTC or ETH. Traders are rather familiar with how futures trading works and hence find trading MOVE contracts much simpler than trading individual options.”