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Short-term implied volatility is peaking at election day expiry, with a 10-vol spread over the prior expiry and skews favouring calls over puts, despite BTC being about 8% below its all-time highs

Meanwhile, the equities market presents a different picture. The S&P 500 is at record highs, with 20% of companies set to report earnings. The options market is skewed toward put protection, pricing in a potential 1.8% move in the index on November 6th, the day after the election.

The equities-crypto correlation is at a historically high 0.83. Given its tendency to mean revert and differing option market positioning, this could signal a tipping point.

The election creates a zero-sum scenario for equities, with sector winners dependent on the outcome. In contrast, both candidates are more crypto-friendly than the previous administration, so any weakness in equities may prompt capital to reallocate to crypto.

Trade Idea

Trump’s speech in Nashville pushed IV to 85%, compared to the current 55% for the election expiry. This suggests an opportunity to deploy into long volatility trades, as potential delays in the election outcome (e.g. recount) could lead to sharp market swings.

BTC ERKO Strangle (8-Nov)

• Max Payout: 6.99x or $10,000 per BTC if spot is just below 85,000 or just above 50,000 at expiry.
• Cost: USD 1,430 per
• Upside ERKO: Strike 75k, Barrier 85k
• Downside ERKO: Strike 60k, Barrier 50k

Spot Ref: 67,700