A VIX-Like Gauge for Bitcoin Sees Its First-Ever Options Trade

Mar 10, 2021

Observations & Insight

$31,376/$300,000 (10.5%)



****MR: The first-ever trade of BitVol, the bitcoin volatility index created by T3 Index, transacted today with LedgerPrime, a quantitative crypto asset management firm as the market-maker. The counterparty to the transaction was an unnamed leading global macro Crypto asset manager. The transaction consisted of a March expiry 1 x 2 BitVol call spread, where the client bought the spread at even premiums (i.e. at ‘zero cost’). BitVol is a measure of the 30-day implied volatility of bitcoin based on tradeable bitcoin options prices; it is also the first bitcoin volatility index. T3 Index previously created the SPIKES Volatility Index.

Lead Stories

A VIX-Like Gauge for Bitcoin Sees Its First-Ever Options Trade
Joanna Ossinger – Bloomberg
A Bitcoin “fear gauge” has seen its first trade.
The transaction off the T3i BitVol Index, which measures the 30-day implied volatility of Bitcoin, consisted of a March expiry 1-by-2 call spread that was bought for zero cost, according to a statement from T3. Quantitative crypto asset management firm LedgerPrime was the market-maker, according to the statement, which added that the counterparty is a leading global macro crypto asset manager.

The most frequently asked questions by Robinhood traders reveal ‘new type of uninformed equity-market participant’
Andrew Keshner – MarketWatch
What happens when Robinhood traders walk out of the stock market?
That’s not the start of a joke. It’s the premise of a new study looking at how young investors on the high-profile trading app with $0 commissions were generating market volatility and “noise” long before the GameStop stock-trading frenzy blared into the headlines earlier this year.
Stocks held by many Robinhood investors had fewer trades and less price volatility when some users of the app were sidelined by platform outages last year, according to Oklahoma State University and Emory University researchers.

A New ETF Named FOMO Targets Everything From SPACs to Volatility
Sam Potter – Bloomberg
A new ETF wants to tap into the fear of missing out among investors desperately chasing the everything rally.
A filing this week with the U.S. Securities and Exchange Commission seeks to create the FOMO exchange-traded fund, named for the famous acronym associated with countless bubbles and market manias.

GameStop Streak Gets Boost From Second Wave of Retail Bets
Bailey Lipschultz and Paul Jarvis – Bloomberg
GameStop Corp. surged for a sixth day, its longest winning streak in over six months as retail investors renewed their commitment to the stock amid optimism on the company’s turnaround plans.
The shares rose 36% to $335.92 at 11:41 a.m. in New York. GameStop has now soared 180% over a six-day rally, propelling its value to $23.4 billion. It is now the largest company in the Russell 2000 Index for the second time this year, pushing it past hydrogen fuel-cell maker Plug Power Inc. which has recently stumbled amid a selloff in high-flying stocks.

Elizabeth Warren Says ‘Sharks’ Citadel, Robinhood Prey on Customers
Daniel Avis – Bloomberg
Senator Elizabeth Warren renewed her attacks on Citadel Securities and Robinhood Markets on Tuesday, accusing the companies at the center of the GameStop Corp. trading saga of profiting at the expense of their customers during periods of extreme market volatility.

Exchanges and Clearing

T+2 Is an Unnecessary Risk for Markets
Eric Noll – Barron’s
A little understood but exacting driver is intensifying and increasing risks to investors and securities firms every day: the current extended clearance and settlement cycle for equities in U.S. markets.
The challenges and volatility of meme stock investing and trading have dominated markets commentary recently, including at Senate hearings held today. The settlement cycle deserves far more attention than it’s received so far. As many retail investors were surprised to learn recently, stocks, unlike equity options, futures, and treasury bonds, take two business days to clear and settle a trade. This arrangement is known as T+2, for trade date plus two days. For other asset classes, trades are settled on trade date, or at worst, trade date plus one day.

GameStop Saga Prompts SEC to Weigh Review of Payment for Order Flow
Dave Michaels – WSJ
The Securities and Exchange Commission’s acting chairwoman signaled support for a wholesale review of a practice that funnels many small investors’ stock orders to be filled by high-speed trading firms.
The system, known as payment for order flow, is decades old but has generated greater scrutiny as more individual investors trade on brokerage apps operated by companies such as Robinhood Markets Inc. Online brokers like Robinhood make money by selling customers’ orders to firms such as Citadel Securities and Susquehanna International Group LLP, which trade with them.

SGX reports market statistics for February 2021
Derivatives average volume rises; Investor demand for SGX-listed ETFs stays robust
Singapore Exchange (SGX) today released its market statistics for February 2021. Daily derivatives volume increased while investor demand for exchange-traded funds (ETF) stayed robust.

Regulation & Enforcement

Payment for order flow models “undermine the relationship between the broker and their client,” Duke Law professor tells Congress
Will Daniel – Markets Insider
In a Tuesday hearing held by the United States Senate Committee on Banking, Housing, and Urban Affairs, Senators sat down with five experts to discuss “Who Wins on Wall Street? GameStop, Robinhood, and the State of Retail Investing.”
In the hearing, Duke Law Professor Gina-Gail S. Fletcher was asked by Sen. Sherrod Brown (D-OH) about stock brokerages using the payment for order flow business model.

Sen. Pat Toomey on GameStop hearing: ‘Gamification’ of stock trading not a problem
Kevin Stankiewicz – CNBC
Sen. Pat Toomey told CNBC on Tuesday he welcomes stock trading apps that make investing seem more approachable, rejecting complaints by some that brokerages like Robinhood have led to the so-called gamification of the equity market.
The Pennsylvania Republican made the comments on “Squawk Box” ahead of Tuesday morning’s Senate Banking Committee hearing on retail investors and the GameStop trading frenzy that began in January. Toomey is the ranking member on the committee.

Why Won’t Libor Die? It’s Complicated; The broken interest rate benchmark still dominates derivatives trading. Regulators may need to be more forceful in persuading banks to drop it.
Mark Gilbert – Bloomberg
The funeral dates for Libor are finally set, with some sensible concessions that keep part of the suite of interest rates alive for longer than initially planned. Those exemptions must be strictly controlled so as not to impede a much broader acceptance of the replacement benchmarks. For now, that’s proving harder than even those most resistant to change might have expected. So market regulators need to step up efforts to force bankers and financiers to embrace Libor’s successors.


The Worst Options Trade You Can Make
Paul Price – TheStreet
Option traders are drawn to volatility like moths are to flames.
Shares which move around readily thus fetch very high premiums. Option buyers “pay up” to own calls or puts on those stocks. Option sellers, also called option writers, love high premiums as they’re getting paid well for selling volatility.
Big premiums can be seductive, though. Traders are often tempted to play high beta names simply because the option prices move around so freely.


Look Before You Leap into Options Contracts: Know Your Contract Specs
Doug Ashburn – TD Ameritrade
You don’t check the water in the middle of a swan dive. You don’t enter an intersection unless you know the exit is clear (in most cities, anyway), and you don’t buy or sell an options contract without knowing the terms of that contract. That means understanding the multiplier, delivery terms, tick sizes, and other contract specs.
Look before you leap.


Volatility Will Usher in Tomorrowland for Investing
Jonathan Gibbons – TABB Forum
In this third in a series of articles on the market’s ceaseless upward trajectory, Jonathan Gibbons, founding partner and President of vigtec.io. continues the discussion after the most recent round of government stimulus. In this article, he offers his take on volatility and explores whether the U.S. markets will continue to head toward, as he calls it, an “Equity Nirvana” or if a “Doom Loop” is in the offing.

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