SignalPlus Volatility Column (20240411): ETH end-of-April call options were heavily sold, IV continues to decline

Yesterday (10 APR), the higher-than-expected US CPI data dealt a heavy blow to the market. Specifically, the March CPI increased by 3.5% year-on-year, exceeding market expectations and the previous value, while the core CPI, excluding food and energy costs, rose by 3.8% year-on-year, 0.1% higher than expected and unchanged from the previous value. According to the report, gasoline and housing expenditures in March contributed nearly 50% of the CPI increase, while car insurance, medical expenses, and clothing costs also saw growth. Within the core index, the growth rate of goods costs slowed, while the services sector rebounded.

Source: SignalPlus, Economic Calendar

After the data release, US Treasury yields surged sharply, with the 10-year yield breaking through the 4.5% threshold and the 2-year yield approaching the 5% mark, currently at 4.967%. The 5/30-year yield curve inverted for the first time since last September. The swap market subsequently delayed expectations for rate cuts. As of now, the probability of no rate cut in June has risen from 50/50 to 83.5%, with fewer than two rate cuts expected for the year. The delayed rate cuts put pressure on US stocks, particularly companies with higher borrowing costs, with the three major indices closing down around -1%. From another perspective, despite repeated downward revisions to rate cut expectations, US economic data remains robust. At this juncture, reducing risk exposure might be a better choice than betting on market direction?

Source: Investing; The US 2-year Treasury yield, sensitive to interest rate policy, surged sharply to challenge the 5.0% threshold.

Source: SignalPlus & TradingView

In the digital currency space, BTC rebounded above 70K, with the long-term consolidation trend still within a narrowing range. From an options perspective, the IV/RV volatility exposure reflected in the statistics remains significant, with front-end implied volatility continuing to decline amid heavy selling of call options. Notably, ETH's end-of-April calls followed BTC's lead from yesterday, showing overwhelming selling of call options. Additionally, ETH's end-of-June large-scale put spread purchases for protection have drawn market attention, while BTC's put options also gained favor yesterday.