͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏

Forwarded this email? Subscribe here for more

The Bitcoin Options Market Saw This Bitcoin Move Coming

10x Research

Oct 23

READ IN APP

Analyzing Bitcoin option markets, derivatives flows, and positioning has become essential to anticipating where Bitcoin and Ethereum prices may head next.

While many traders were caught off guard by the recent weakness, the options market had already been signaling this shift—something we’ve consistently highlighted in our weekly Bitcoin and Ethereum option reports.

You may not be aware that we publish weekly options analysis covering Bitcoin and Ethereum, so we wanted to share a snapshot of what’s included in our latest report. If you’d like to receive this analysis in full each week (10-page report), along with deeper insights and trade ideas, simply upgrade your subscription (this upgrade includes our widely popular Market Updates subscription).

Bitcoin and Ethereum Options Overview

Traders are bracing for short-term turbulence across Bitcoin and Ethereum, with option markets signaling caution but not yet capitulation. Volatility curves have steepened at the front end, indicating a demand for near-term protection, even as longer-term expectations remain anchored. Skews have flipped sharply bearish after October’s liquidation, highlighting an uptick in put demand and hedging activity.

While Bitcoin’s implied volatility still trades above realized—rewarding option sellers—Ethereum’s has dropped below realized, making its options cheap to buy. Flows confirm this divergence: Bitcoin traders are selling calls for income, while Ethereum traders are defensively buying puts. Against this backdrop, 10x Research sees opportunity in structured trades—shorting rich front-end BTC volatility and buying longer-dated ETH exposure to capture time decay and potential volatility normalization.

Bitcoin: Term structure

Summary:

BTC/ETH Term Structure: Both Bitcoin and Ethereum option curves show traders bracing for short-term turbulence while keeping longer-term volatility expectations anchored. BTC’s front-end inversion and ETH’s sharp short-dated steepening highlight rising demand for near-term protection and gamma exposure—signaling markets expect a temporary volatility spike, not a lasting structural shift.

Skew/Risk Reversals: Both Bitcoin and Ethereum option skews show traders positioning for short-term downside risk but longer-term resilience. Bitcoin’s mildly deeper negative skew signals rising near-term put demand without broader bearish conviction, while Ethereum’s sharp front-end flip to bearish and still-bullish long end reflects event-driven caution now but optimism for recovery ahead.

Bitcoin/Ethereum Skew

Trends in BTC/ETH Skew: Over recent weeks, BTC and ETH skews have flipped sharply bearish, with traders shifting from buying upside calls to accumulating downside puts following the mid-October liquidation and funding reset. The deepening negative skew highlights heightened demand for protection and tail-risk hedging, suggesting markets expect continued short-term volatility and downside risk into month-end.

BTC/ETH Carry: Bitcoin’s volatility carry remains positive, as implied volatility continues to trade above realized levels—rewarding option sellers through time decay while punishing volatility buyers except during brief market shocks. Ethereum’s carry, however, has flipped negative, with implied volatility now below realized (72.7% vs. 80.5%), making option buying more attractive as ETH continues to realize higher-than-expected volatility relative to pricing.

Flows: Bitcoin option flows were dominated by call selling (27.5%) and put buying (24.6%), signaling traders taking profits on upside exposure while adding downside protection. In contrast, Ethereum flows showed a stronger defensive bias, with put buying (30.5%) and call selling (28.3%) reflecting a market more focused on hedging downside risk than chasing upside.

BTC Option Trade Idea: This Bitcoin short-volatility calendar/call-spread combination sells 8 Nov $110k calls and buys a 28 Nov $110k–$120k call spread for roughly zero cost, capturing rich short-term premiums while keeping limited upside. It profits if BTC stays below $110k in the near term and then grinds higher toward $115k–$120k by late November, earning positive carry from time decay and potential volatility mean reversion with losses capped beyond $120k.

ETH Option Trade Idea: This Ethereum diagonal call spread exploits richer short-term volatility to help fund longer-dated exposure by selling the 7 Nov $4,000 call for $151 and buying the 28 Nov $4,000 call for $277 (net cost $126). The trade profits if ETH stays below $4,000 until the short call expires, then rallies toward $4,200 by late November—capturing front-month time decay while maintaining long delta and long vega exposure.

Gain access to the full report here.

10x Research Trading Signals publication overview.