Definition
Skew is the relative richness of put vs call options, expressed in Implied Volatility (IV). For options with a specific expiry, 25 Delta Skew refers to puts with a delta of -25% and calls with a delta of 25% to demonstrate this difference in the market’s perception of implied volatility.
25 Delta Skew is calculated as the difference between a 25-delta put’s implied volatility and a 25-delta call’s implied volatility, normalized by the ATM Implied Volatility. This metric focuses on options contracts expiring in 1 week.
Quick Take
- Bitcoin Options 25 Delta Skew implies puts are becoming more favorable in this market, which indicates bearish sentiment is building in the crypto ecosystem.
- January saw a bullish regime for Bitcoin, as calls were the favorable option.
- February, however, saw switching between calls and puts, which was reflected in a fairly flat price structure for February.
- However, March has seen Bitcoin down 3%, as the premium for puts continues to increase.
- While volatility is near all-time lows, something could be brewing in the short-medium term.
Analyst
James Van Straten
James fervently appreciates data, technology, and trend-spotting. As a tech and liberty maximalist, he hails Bitcoin as the 21st century’s paramount invention.
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