Delta is the rate of change of an option's price relative to a change in the price of its underlying.
For example, the price of a 50 delta option will move 50% as much as the underlying.
Options used to be close to irrelevant for bitcoin's price.
Until now.
At current price levels, hedging large option notionals has a major impact on price.
Here's a quick thread on options 👇
Delta is the rate of change of an option's price relative to a change in the price of its underlying.
For example, the price of a 50 delta option will move 50% as much as the underlying.
- if long 50 delta call on 1 BTC => long 0.5 BTC
- if long 50 delta put on 1 BTC => short 0.5 BTC
- if short 50 delta call on 1 BTC => short 0.5 BTC
- if short 50 delta put on 1 BTC => long 0.5 BTC
For a call, the higher price goes => the more in the money the call => the higher the delta.
Once delta gets close to 100, odds are ~100% the option will expire in the money.
When you buy an option, you are long gamma.
That means the further in the money the option goes, the faster the option's price will increase.
That's positive convexity.
The greeks all measure the sensitivity of an option to various changes.
There are other greeks, such as Rho, Volga and Vanna, but understanding these is not necessary now.
Theta is the rate of change of an option's price relative to a change in time to expiry.
The option loses value as time passes. A trader who is long an option compensates time decay with convexity.
Say he sold a BTC call, so he buys bitcoin to hedge. As price goes up, to remain delta neutral, he buys more bitcoin.
Gamma is the key.
Or more precisely, the gamma position of those who hedge their delta (mostly dealers).
Conversely, when dealers have positive gamma, they will buy on the way down, and sell on the way up, dampening moves.
TL;DR Negative Gamma = Violent Moves
https://t.co/LJ6eYYRctX
Here's the market impact of the negative gamma I mentioned, quantifiedhttps://t.co/pOhkXjZmWD
— Alex Kr\xfcger (@krugermacro) January 8, 2021
More from Crypto
1/ A thread on Nexgen’s Arrow & the #uranium cycle ($NXE)
2/ Given the scale and cost structure of Arrow, it makes sense that investors are intensely focused on its delivery timeline. This thread will discuss possible timelines, current market expectations (i.e., what’s “priced in”) & how different Arrow scenarios will impact the mkt.
3/ As you can see from the litany of responses to Michael’s tweet, there is great skepticism in the market regarding Arrow’s timeline. This is largely due to a bearish narrative conveyed by competing CEO’s whose assets only hold value if Arrow is substantially delayed.
4/ Those who played “King of the Hill” as a child would remember that it is the person at the top who is constantly attacked, not the kid sitting at the bottom of the hill in the mud. No one cares enough about that kid to attack them. This is a good parable for $NXE & Uranium.
5/ First a quick note on “this cycle” – Segra generally defines this cycle as the deficits forecasted from the mid-2020s to late-2030s. When people imply an asset producing in the mid-to-late 2020s will “miss the cycle”, they clearly have not done any real S/D modelling.
Can anyone tell me an estimated time frame that Nexgen could be permitted, start building their mine and be producing #uranium ??? @quakes99 @JekyllCapital @travmcph @NexGenEnergy $nxe
— Michael Pierce (@Big_U_Dawg) January 22, 2021
2/ Given the scale and cost structure of Arrow, it makes sense that investors are intensely focused on its delivery timeline. This thread will discuss possible timelines, current market expectations (i.e., what’s “priced in”) & how different Arrow scenarios will impact the mkt.
3/ As you can see from the litany of responses to Michael’s tweet, there is great skepticism in the market regarding Arrow’s timeline. This is largely due to a bearish narrative conveyed by competing CEO’s whose assets only hold value if Arrow is substantially delayed.
4/ Those who played “King of the Hill” as a child would remember that it is the person at the top who is constantly attacked, not the kid sitting at the bottom of the hill in the mud. No one cares enough about that kid to attack them. This is a good parable for $NXE & Uranium.
5/ First a quick note on “this cycle” – Segra generally defines this cycle as the deficits forecasted from the mid-2020s to late-2030s. When people imply an asset producing in the mid-to-late 2020s will “miss the cycle”, they clearly have not done any real S/D modelling.
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Less than 1 hour since I started adding stuff to https://t.co/lDdqjtKTZL again, and profile pages are now responsive!!! 🥳 Check it out -> https://t.co/fVkEL4fu0L
Accounts page is now also responsive!! 📱✨
💪 I managed to make the whole site responsive in about an hour. On my roadmap I had it down as 4-5 hours!!! 🤘🤠🤘
Just added Telegram links to https://t.co/lDdqjtKTZL too! Now you can provide a nice easy way for people to message you :)
Less than 1 hour since I started adding stuff to https://t.co/lDdqjtKTZL again, and profile pages are now responsive!!! 🥳 Check it out -> https://t.co/fVkEL4fu0L
Accounts page is now also responsive!! 📱✨
💪 I managed to make the whole site responsive in about an hour. On my roadmap I had it down as 4-5 hours!!! 🤘🤠🤘
