FTX displays options greeks! This article discusses where you can find them, what they mean, and how they are calculated.
All of the statistics below relate to the Black-Scholes options pricing model.
Implied Volatility, or IV: IV reflects the market's expectation of volatility of future BTCs. FTX reports annualized IV numbers.
High IV reflects that the market thinks that BTC will move a lot (and that options increase in value), and low IV suggests the opposite.
Delta: the rate of change between the option's price and BTC price.
Holding one Call contract with a delta of 1 would confer one BTC's worth of BTC price exposure.
Gamma: the rate of change between the option's delta and BTC price.
A high gamma indicates that delta could change a lot even with small price movements in BTC. A low gamma indicates the opposite.
Where you can see them on FTX
Greeks are reported for each of the following on the FTX options page:
If you hover over the "Implied Volatility" value for a quote, the following will be displayed:
IV is inferred using the price: we find the value for IV that approximately solves Black-Scholes given the option parameters, current BTC index price, and the option quote price.
Delta and Gamma are both computed using that inferred IV.
To see greeks for your own quotes, refer to the Implied Volatility column in the My Quotes table.
If you hover over the text displaying IV (to the left of a request's Limit Price), you'll see a display similar to what's shown above for Quote prices. These stats are calculated identically to quote prices, except that they display an IV implied by the limit price.
If you hover over the "Implied Volatility" value for a trade, you'll see a similar popup with stats.
Note that the IV, delta, and gamma are locked in at the time of the trade.
Also note that none of these are well-defined for expiration fills (since, at time of expiration, the value of an option is fully determined, and so its price no longer implies anything about volatility, it no longer confers BTC price exposure, etc).
Greeks can be found by hovering over the "Implied Volatility" value for a public trade. Like with fills, greeks are locked in at the time of the trade.
Greeks can be found by hovering over the "Delta" value for one of your positions.
Like with greeks for quotes and limit prices, these values update over time.
We determine the Volatility of a position using MOVE contracts:
- We take the three MOVE contracts whose strike price hasn't been determined yet and whose expiration is closest to that of the option
- For each, we calculate the yearly implied volatility of that MOVE using Black Scholes:
- (mark price / sqrt(([1 day if daily MOVE, 7 days if weekly MOVE, 80 days if quarterly MOVE] - 1 hour) in years) / BTC index price
- We take the geometric mean of
- max(half the lowest, one quarter the median) implied volatility of those MOVEs
- min(twice the highest, four times the median
Delta and Gamma are computed using this Volatility.