ETH implied volatility drops to nearly a one-year low, signaling opportunity behind the rising bearish sentiment in the options market

According to the latest news, ETH implied volatility (IV) has fallen to a very low level of 1.1% in the past year percentile. Behind this seemingly “calm” market appearance, there are clear bearish expectations among options market investors. As the approximately $2.1 billion BTC and ETH options are set to settle this Friday, the market is brewing a re-pricing of volatility.

The True Meaning of Extremely Low Implied Volatility

Volatility data warning signals

The extremely low level of ETH implied volatility appears to suggest that market risk is diminishing. However, from actual trading in the options market, this actually reflects an increasing need among market participants to hedge against short-term downside. Over the past week, the 25-Delta Skew has become notably negative, especially in the short-term 7-day and 30-day maturities, indicating funds are actively buying put options for downside protection.

Options trading data confirms bearish sentiment

Recent block trades over the past 24 hours further confirm this trend:

• BTC put spread: Buy 88k/ sell 90k (30JAN26-P), approximately 1,115 BTC traded, net premium income of about $730,000
• ETH wide straddle: Buy 2800-P & 3200-C, approximately 5,000 ETH traded, net premium expenditure of $2.03 million

These two large trades reveal different market expectations. BTC investors are choosing put spread strategies, expecting a decline but aiming to reduce costs; ETH investors are using wide straddle strategies, betting on rising volatility, indicating they anticipate significant price swings.

Price Context and Volatility Relationship

Based on relevant data, ETH’s current price is $2,915.38, with recent performance not ideal:

• Down 6.11% in the past 24 hours
• Down 11.53% in the past 7 days
• Down 4.65% in the past 30 days

This persistent downward pressure contrasts with the extremely low implied volatility—a paradox. Usually, sharp price declines push volatility higher, but here implied volatility remains at a historic low. This suggests the market might be pricing in a “calm before the storm,” with a volatility rebound possibly imminent.

The Catalyst Role of Expiry

This Friday’s options expiry involves about $2.1 billion, marking an important time point. Large-scale expiries often trigger volatility re-pricing around the date, especially when market sentiment is divided. The current accumulation of bearish puts and long volatility positions are all waiting for this catalyst.

Practical Value of Trading Tools

Gate recently launched a multi-leg options order feature, which is especially valuable in this market environment. The feature supports various options strategies such as spreads and straddles, allowing users to create multi-leg positions at once and visualize overall costs, profit/loss structures, and risk exposure in a straightforward manner.

For investors looking to capitalize on this volatility opportunity, this tool can significantly reduce operational complexity. No need for leg-by-leg execution; you can quickly build and manage multi-leg strategies—particularly useful when volatility may change rapidly.

Follow-up Focus

Extremely low implied volatility usually does not last long. After expiry, as market sentiment releases and large trades close, volatility is likely to rebound sharply. Investors should monitor:

• Price movements and volatility changes before and after expiry
• The unwinding of bearish options positions
• The direction of new options positions being established

Summary

ETH implied volatility hitting a one-year low does not mean market risk is diminishing; rather, it indicates that the market is accumulating downside hedging demand. Large options trades clearly show investors are preparing for potential volatility. This Friday’s expiry will be a key turning point, where volatility may rebound and prices could reprice. For experienced options traders, this is an excellent opportunity to leverage multi-leg strategies to seize the moment.