Skew Trader Pro REPACK
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The Bitcoin (BTC) daily price chart seems to be making a steady recovery pattern, but some concerning indicators are coming from derivatives markets. At the moment, the futures and options markets are showing a lack of confidence from Bitcoin pro traders, but there's a positive spin to the data.
While retail traders' favorite instrument is the perpetual contract (inverse swaps), pro traders often opt for fixed-calendar futures and options. Although they are more complicated to trade, these derivatives offer more complex strategies.
The Bitcoin futures annualized premium should run between 5% to 12% to compensate traders for "locking in" the money for two to three months until the contract expiry. Levels below 5% are extremely bearish, while the numbers above 12% indicate bullishness.
So the big question is: Is the glass half full? For example, if Bitcoin breaks the $42,000 resistance, some traders will likely be caught off guard, so there's additional buying activity because no one wants to be left behind.
As displayed above, we've been near 10% for almost a week despite the 18% BTC price recovery since the $33,000 bottom. The options skew data shows that pro traders are still pricing higher odds for a market crash.
The largest players on the options market bought more than $10 billion in puts on individual stocks last week, a record for that group and close to the most ever by any cohort of traders, according to Sundial Capital Research. The rush for protection came as the S&P 500 slumped into the weekend and the Cboe Volatility Index spiked above 32 to the highest level since June.
Here's what you do. Start buying options with lower implied volatility while selling options with higher implied volatility. If you then offset the sales of options by 2:1 to the purchases you will exploit the negative skew in the IWM put options.
Overall, the ratio spread is a little different as compared to a traditional credit spread. With a credit spread you are short and long an equal number of contracts so the volatility risk and skew is minimal and more of a directional play on the stock. The ratio spread is a great tool to keep in your arsenal of strategies.
To assess whether professional traders became pessimistic, analysts should monitor the futures premium, also known as 'basis.' This indicator measures the price gap between futures prices and the regular spot market.
To effectively measure how professional traders are positioned, investors should monitor the top traders' long-to-short ratio at leading crypto exchanges. This metric provides a broader view of the traders' effective net position by gathering data from multiple markets.
It is worth noting that exchanges gather data on top traders differently because there are multiple ways to measure a clients' net exposure. Therefore, any comparison between different providers should be made on percentage changes instead of absolute numbers.
Both OKEx and Huobi displayed an increase in the top traders' long-to-short ratio, indicating that either they closed short positions or opened long ones, which is a bullish move. Binance was the only exception because the indicator dropped, indicating some pessimism, but the variation over the past couple of days has been insignificant.
The above chart shows that there had been some bearishness ahead of July 19, but Bitcoin options markets have flipped neutral since then. Moreover, there are no signs that professional traders are growing worried about a potential price drop because the 25% skew indicator remains near zero.
Classic TWS offers quick click order entry from bid and ask prices, with the order row displayed directly beneath the Market Data row. Classic TWS is always available to traders who need more advanced tools and algos.
Based in London, skew was co-founded in 2018 by CEO Emmanel Goh and COO Tim Noat, with a mission to make cryptocurrency markets more transparent and accessible to institutional finance. Since then, the company has grown to serve more than 100 customers, including One River Asset Management and Susquehanna International Group,
STT platforms are used by retail, active and institutional traders worldwide. Our platforms offer the capability and ease to trade multiple asset classes and international markets from a single account.
Sophisticated buy-side algorithmic trading suite with advanced order management. Sterling Trader® Elite gives institutional and agency traders complete customizable control of their trading for equities, options, complex options and futures markets worldwide.
Sterling Trader® Algo Order Entry allows traders to quickly and easily send orders using algo strategies. Our algo module is intricately built to the unique specifications of each algo provider. Traders can set the parameters of each order and stage those orders to be submitted throughout the trading day.
The Sterling Trader® Order Desk Manager is an order management system to allow traders to manage equity and options orders submitted via FIX protocol from third-party systems. Executions are passed back to the client in real time. Traders can also utilize advanced block order staging for orders not submitted via FIX protocol.
The Sterling LST platform is offered to proprietary trading groups that want to trade U.S. equity and options markets. Sterling LST delivers a robust trading system to professional traders that demand highly established market data and performance. Traders of all experience levels can easily design and customize layouts and rules to best fit their trading style.
In the last release, we have already added Bracket Orders, which allow you to reduce losses in case of an unfavorable trade. Today we present OCO orders (One Cancels Other), which is a widely known and popular order type among traders. Using the trading functionality of the Quantower platform, you can set two independent limit orders and combine them into an OCO group. When one of the orders is executed, the second will be automatically canceled.Additionally, for each limit order, you can set Bracket orders (SL and TP) and then merge them into a group.
Introducing an Excel tool that can analyze how an options trade is impacted by changes in IV and IV skew. This tool is based on theoretical options modeling and hence is able to exclude other factors such as delta and theta from its analysis.
The nascent nature of the crypto options market causes pricing inefficiencies and positive expected value trades. Identify mis-pricings and high probability trades in the budding crypto options market. Monitor trade flow and changes in open interest. Detailed analysis helps traders understand what whales and other big fish are doing in the crypto options market, providing insight into hidden trading opportunities. Use option calculators to estimate probabilities, Black-Scholes pricing and different implied volatility outputs.
If you trade options, you may have heard the term IV skew. If you know what it is, great. If not, this little blog may shed some light on the subject. If you know what to look for, it can improve your profit potential by putting the odds even more on your side.
An IV skew is when there is a difference in implied volatility (IV) levels for different expirations. For instance, one expiration has an implied volatility of 23% and another has an implied volatility of 28%. Keeping it simple, implied volatility is how options are priced. When IV is higher than normal, option prices are higher than normal and vice versa. Many option traders use the average IV levels over the course of a year to gauge whether IV is currently high or low. Others compare it with historical volatility (HV), which is the volatility of the underlying. IF IV is higher than HV, options may be overpriced and vice versa.
Over the past several months, option traders have seen plenty of IV skews. When selling options you want IV to be high, and when buying them you want it to be low. In other words, sell high and buy low. A longtime spread (like a calendar or diagonal) is when an option trader sells a shorter expiration and buys a longer expiration. A preferred IV skew is for the IV of the short option to be higher than the long option as in the example below.
A recent article by Perez, Frijns, Fuertes, and Miffre studies the pricing of skewness in commodity futures markets. The time-series tests show that a fully-collateralized portfolio that buys commodities with low skewness and shorts commodities with high skewness earns 8.01% a year with a t-statistic of 4.08. The performance of the low-minus-high skewness portfolio is not fully explained by a standard commodity benchmark, which makes it a perfect addition to commodity-based multi-strategy portfolios.
Academic studies explain skewness effect in all assets by investors are willing to pay a higher price, and to earn a lower expected return, on assets with lottery-like payoffs. A recent study shows that skewness affects commodity futures returns and documents that skewness is priced in different markets than the ones where retail investors typically trade. Hence, its findings suggest that the effect of skewness on asset returns is not merely a consequence of retail investor preferences. Rather this indicates that other groups of traders have these heterogeneous preferences.
The investment universe consists of 27 futures contracts on commodities. Each month, investor calculates skewness (3rd moment of returns) from daily returns from data going 12 months into the past for all futures. Commodities are then sorted into quintiles and investor goes long quintile containing the commodities with the 20% lowest total skewness and short quintile containing the commodities with the 20% highest total skewness (over a ranking period of 12 months). The resultant portfolio is equally weighted and rebalanced each month.
Binary options "are based on a simple 'yes' or 'no' proposition: Will an underlying asset be above a certain price at a certain time?"[22] Traders place wagers as to whether that will or will not happen. If a customer believes the price of an underlying asset will be above a certain price at a set time, the trader buys the binary option, but if he or she believes it will be below that price, they sell the option. In the U.S. exchanges, the price of a binary is always under $100.[22] 2b1af7f3a8