QCP Capital: Short-term implied volatility peaks at election day expiration, the crypto market still tends to be bullish

QCP Capital stated that the short-term implied volatility peaked on election day, expanding by 10 volatility points from the previous expiration date, and skewness favored call options rather than put options, even though Bitcoin was about 8% lower than its historical high.

Meanwhile, the stock market presented a different picture. The SP 500 index hit a record high with 20% of companies set to announce their earnings reports. The options market leaned towards bearish protection, predicting that this index could fluctuate by 1.8% on November 6th, the day after the election. The correlation between stocks and cryptocurrencies reached a historic high of 0.83. Given its mean reversion trend and differences in option market positioning, this may signal an upcoming turning point.

The election has created a zero-sum game scenario for the stock market where industry winners will depend on election results.

In contrast, both U.S presidential candidates are more supportive of cryptocurrencies compared to the previous administration; therefore any weakness in stocks could potentially prompt capital reallocation into cryptocurrency markets.