SignalPlus Volatility Column (20240806): Black Monday

Last week, the weak economic data represented by the US non-farm and manufacturing index triggered market concerns about economic slowdown, and global assets suffered from the selling pressure brought by Black Monday. The exchange rate of the US dollar against the Japanese yen once fell below 142, giving up almost all the gains in the past year. The stock indexes of Japan, South Korea, and Turkey triggered the circuit breaker mechanism. The three major US stock indexes all closed down by about 3%, and the market value of the Big Seven evaporated by 1.3 trillion US dollars at the opening. The futures market fully priced in the Federal Reserves 50 basis point rate cut in September. The yield on the two-year US Treasury bond once ended the inversion with the 10-year bond during the session, and is now at 3.957%.

Source: TradingView

The markets selling sentiment has also spread from traditional markets to digital currencies. As a risk asset highly correlated with SP 500, BTC plunged below $50,000 yesterday, triggering panic in the market. Short-term IV rushed to the three-digit range, liquidity ran, and Vol Skew also fell along with the price. The surge in demand on Wing caused Flys valuation to rise rapidly.

However, as the price gradually rebounded back to $55,000, the liquidity of the options market gradually returned, IV escaped from the local high point, the high Vol Premium at the tail was also repriced, and Fly fell overall. For Vol Skew, although the negative slope of the front end rebounded slightly, the more noteworthy change is the further sharp drop in the far-end Vol Skew. In fact, when the price plummeted yesterday, only the front end responded, and the far-end Risky with poor liquidity was not re-priced until today.

Source: Deribit (As of 6 AUG 16: 00 UTC+ 8)

Source: SignalPlus, ATM Vol.

Source: SignalPlus, 25 dRR, Far End Vol Skew is Repriced

Source: SignalPlus, 25 dFly

Data Source: Deribit, overall distribution of ETH transactions

Data Source: Deribit, overall distribution of BTC transactions

Source: Deribit Block Trade

Source: Deribit Block Trade

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