Pionex Trading Desk 3/7/2023
Fundamentals
Powell is speaking to House & Senate at 10 am EST today and tomorrow. He is expected to give further clarity on the economic conditions of the US and how rate hikes are working. This will be like a pre-Fomc meeting teaser. I expect he will be dovish again, given his stance last time. But also I believe Powell will talk about the strong data we have gotten, which required a higher terminal rate to fight off inflation.
Currently, in the conference, Powell said, “We don’t want regulation to stifle innovation.” and “We see fraud, we see lack of transparency, we see run risk.”
Option Data
IV is elevated compared to yesterday due to Powell speaking. +-1K strike IV: Calls 57% & Puts 61%. Compared to yesterday’s IV for Calls, 50% and Puts 55%. We see around a 7% increase in IV.
1d & 2d 25 delta skew is at -4% leaning towards the bearish side. Showing traders are positioning for some downward protection before Powell’s talk. ETH has a -18% skew to the downside. We can see this in the BTC option OI (open interest). There is a high number of put concentration in the $21,000 and $22,000 area for March 9th.
Technicals
Traditional equities are opening flat, and BTC is in the middle of the trading range at $22.3k. We are in a trading range between $22k – $22.6k. A break above or below these levels should bring high-volume demand to either side. Downside target $21k – 21.5k Upside target 23.5k. Potential 5% move in either direction.
Trades
Due to the higher volatility and having consolidated for 4 days, a direction will be determined soon. With the data from the options market, a downward move will be likely.
So in anticipation, we took a small position in selling 2-day expiry far OTM $25k, $1675 calls. Will wait for Powell’s meeting for more clarity.
During the meeting, we had an initial pull down towards $22,000, so we took the opportunity to invest in $20,500 Buy-The-Dip orders because there is a very low probability of reaching there in 3 days. There is also a strong support level at $20,000 – $25,000 that we do not believe will break easily.
