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Some block trade option strategies used by institutional desks within Crypto

Public
4 months ago | 2 minutes read
I'm often asked about the abbreviations I use to describe Option strategies, this short blog should allow anyone not familiar to quickly get upto speed, we will dive right in. I will be covering the the following directional plays, PS, CS, RR, 1x2:

PS = Long PUT SPREAD 🐻 or Short PUT SPREAD 🐂
CS = Long CALL SPREAD🐂 or Short CALL SPREAD🐻

Long PS, you want the price lower⬇ and you are paying some premium for that privilege, Short PS you want the price higher⬆ and the most you can earn is the premium.  

Sample block trade script used by CME, Deribit & bit.com exchanges:
Trade: ETH 30 Jul 21 1800/1600 Put Spread 250x (500 ETH) @ 0.0585 ETH, Vols 114.9% 119.4%, Ref 1734.54, Blocked on DBT

Let's unpack that📦:

ETH = Ethereum
30 Jul 21 = Expiry Date
1800/1600 = The Strike prices of the spread
Put Spread = The Strategy
250x (500 ETH) = The amounts per leg and the total
@ 0.0585 ETH = The cost in ETH per ETH so the total is 0.0585*250 = 14.625 ETH
Vols 114.9%, 119.4% = The Implied Volatility of the trade leg
Ref 1734.54 = The ETH Reference Price used.
Blocked on DBT = The Exchange that agreed to clear the block.




RR= Long RISK REVERSAL🐂 or Short RISK REVERSAL🐻 (There is alot of skew and volatility moving parts here, but for this post we are keeping life simple)

Short RR, you want the price lower⬇ and there is usually little or no premium as the risk is on the wings, Long RR you want the price higher⬆ here is usually little or no premium as the risk is on the wings. 



PS1x2= Long PS1x2🐂 or Short PS1x2🐻 (There is alot of skew and volatility moving parts here, but for this post we are keeping life simple)
CS1x2= Long CS1x2🐻 or Short CS1x2🐂 (There is alot of skew and volatility moving parts here, but for this post we are keeping life simple)

Short PS1x2, you want the price lower⬇ and there is usually little or no premium, but you need a fast move down as the 'belly' if price stays at A (see below) can be expensive. 



<I will be adding to to this>