According to CoinDesk, Bitcoin's implied volatility has significantly decreased following the approval of spot exchange-traded funds (ETFs) by the Securities and Exchange Commission (SEC). This development offers a lesson for volatility traders as the focus shifts to optimism surrounding ether ETFs. Nearly a dozen spot bitcoin ETFs began trading in the U.S. on Thursday after the SEC approved them on Wednesday. As speculators consider ether as the next likely candidate for a spot ETF approval, it is important to note the impact of implied volatility on the options market.
Implied volatility represents investors' expectations of price turbulence and positively impacts the prices of call and put options. A call allows buyers to profit from or hedge against price rallies, while a put offers protection against price slides. Crypto quant researcher Samneet Chepal suggests that holding a long volatility exposure on the day of the ETF announcement may be risky for ether traders. Chepal recommends considering a short vega (vol) position for the ether ETF, as the bitcoin ETF experience provides insight into what might be coming up.
Bitcoin's annualized seven-day implied volatility reached 96% ahead of the SEC's approval but has since collapsed to 52%. While bitcoin's price began rallying on ETF optimism in early October, options warned of a post-approval cooling period. Traders may want to keep track of how ether options are priced as they speculate on the potential launch of an ether spot ETF. Several firms have filed applications for spot ether ETFs, including BlackRock, with the earliest deadline for approvals in May for VanEck's ETF, followed by BlackRock's in August.
