In Crypto Options, How Does a Trader’s Quote Competitiveness Affect Their Implied Volatility (IV) Surface?
A trader's competitive quotes, particularly those frequently executed, validate the implied volatility (IV) they are using to price the option. If a trader consistently has the best quotes and high fill rates, it suggests their IV surface accurately reflects market consensus and liquidity.
Poor competitiveness might signal that their IV surface is misaligned, either too high or too low, relative to other market participants.
Glossar
Arbitrage Opportunities
Exploitation ⎊ Arbitrage Opportunities in crypto derivatives arise from temporary price dislocations between related instruments across different venues or between the derivative and its underlying spot asset, demanding rapid, automated execution to capture the spread.
Competitiveness
Advantage ⎊ Competitiveness within cryptocurrency, options, and derivatives manifests as the capacity to consistently generate risk-adjusted returns exceeding market benchmarks, often through superior informational access or algorithmic execution.
Quote
Basis ⎊ The expression of a desired transaction price for an asset or derivative contract at a specific point in time.
Quote Competitiveness
Precision ⎊ Quote competitiveness, within cryptocurrency derivatives, reflects the narrowness of bid-ask spreads relative to underlying asset volatility and liquidity, indicating efficient price discovery.