According to CoinDesk, Bitcoin's implied volatility has declined significantly following the approval of spot exchange-traded funds (ETFs) by the Securities and Exchange Commission (SEC). This development offers a lesson to volatility traders as the focus now turns to optimism surrounding ether ETFs. Nearly a dozen spot Bitcoin ETFs began trading in the United States on Thursday after the SEC approved them on Wednesday. As speculators view ether as the next likely candidate for spot ETF approval, it is important to note the impact of implied volatility in the options market.
Implied volatility represents investors' expectations of price turbulence and has a positive impact on call and put option prices. A call allows buyers to profit from or protect against price increases, while a put provides protection against price declines. Crypto quantity researcher Samneet Chepal suggests that maintaining long exposure to volatility on the day of the ETF announcement can 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 could happen.
Bitcoin's seven-day annualized implied volatility reached 96% before the SEC approval, but has since collapsed to 52%. As bitcoin's price began to rebound following ETF optimism in early October, options warned of a cooling period following approval. Traders may want to track ether options pricing when speculating on the potential launch of an ether spot ETF. Several companies have filed applications for spot ether ETFs, including BlackRock, with the first approval deadline set for VanEck's ETF in May, followed by BlackRock's in August.
