Gate Research Institute: Bitcoin’s Sharp Drop Sparks Volatility Premium, Year-End Options Volatility Strategies Heat Up

The Gate Research Institute reports that Bitcoin dropped below $100,000 for the first time since June this week, reaching a low of $99,932 and breaking below the 200-day moving average, marking the second-largest single-day decline of the year. Ethereum also briefly fell below $3,200 during the session. The sharp decline was mainly driven by hawkish comments from Fed Chair Powell and concerns over a potential government shutdown, leading to tightening dollar liquidity and a surge in risk-averse investor sentiment. On November 3, DeFi protocol Balancer V2 was attacked, resulting in losses exceeding $128 million. The vulnerability stemmed from precision and callback flaws in the stable pool, allowing attackers to repeatedly arbitrage through batch swaps, affecting multiple blockchain ecosystems and highlighting systemic security risks in DeFi.

Implied volatility (IV) in the options market has surged rapidly, with Bitcoin’s IV at 48.11% and Ethereum’s at 75.56%. Both assets’ 25-Delta Skew has quickly turned negative and the curves have steepened, indicating rising market panic and defensive sentiment. Short-term put options are seeing significant volume, as investors generally buy protective puts or construct short-term options spreads to hedge risks. Today, a large trader executed an options strategy involving approximately 1,200 BTC: buying BTC-281125-120000-C and selling BTC-261225-115000-C, aiming to profit from a mild upward move and short volatility at low cost, earning around $2.3 million in premiums. Overall, the market is shifting from trend trading to volatility trading, with year-end volatility strategies becoming increasingly attractive. The Gate App’s options features are now fully live, supporting main assets like BTC and ETH settled in USDT, with new cross-asset and portfolio margin mechanisms to enhance trading flexibility and capital efficiency.

More details: https://www.gate.com/learn/articles/gate-research-btc-plunge-triggers-volatility-premium-surge-year-end-option-volatility-strategies-heat-up/13549