Strategy Summary

Approach: interdisciplinary playbook

Process: actively managed relative value arbitrage
Signals: systematic optimization
Execution: discretionary

Trade Example
Signals (Letters are referencing optimization tools on following pages)
(A) Gamma long/short: Sol gamma cheap = +30 vols
(A) Gamma long/short: Eth gamma neutral = -5 vols
(B) Spot correlation: Eth/Sol high = 93%
(C) Statistical arbitrage: Eth/Sol percentile high = 95%
(D) Implied volatility term surface: Eth and Sol ATM and wings = steep
(E) Implied volatility correlation: Eth and Sol implied volatility = expensive
Optimized Greeks
Gamma/Theta: long Sol gamma/pay theta
Weighted Vega: short Eth and Sol (short front vs. long back)
Absolute Vega: short Eth and Sol
Skew: short Eth and Sol
Optimized Position
Long: 2 week Eth and Sol ATM straddles
Short: 2 month Eth and Sol 20 delta calls
Long: 6 month Eth and Sol ATM straddles
Greek Positioning
Gamma: long
Theta: paying
Weighted Vega: short
Absolute Vega: flat
Rho: flat
Convexity: short
Management
Delta/Gamma/Theta: actively managed through systematic hedging
Vega: passive volatility roll
Rho: passive basis roll
Convexity: actively managed against delta and vega positioning
P&L Attribution
Delta/Gamma/Theta = +25 vols/day (0.50% spot/day)
Vega = +.20 vols/day/vega
Rho = flat
Optimization Tools

(A) Gamma Long/Short

Last TV TV^ Deriv 20ema 20ema^ GCR Diff Hvol 1w IV 1m IV 1w RR 1m RR 1m Fly

BTC 46405 24.4 62.6 0.68 34.2 50.5 45.3 -9.4 41% 53.0 56.0 4.0 4.0 0.65
Eth 3495 31.9 47.0 0.24 41.4 60.4 52.9 -5.0 49% 59.0 62.5 4.0 4.0 0.75
Sol 135.45 78.8 131.2 0.53 100.1 152.8 126.4 30.0 96% 94.0 98.0 5.0 7.0 1.00
Avax 97.43 60.6 105.7 0.45 85.4 144.6 115.0 17.0 50% 96.0 100.0 4.5 6.0 0.85
Ada 1.1756 37.8 55.9 0.25 53.9 84.7 69.3 0.3 48% 67.0 71.0 3.0 3.0 0.85
Matic 1.6846 42.8 63.9 0.27 59.3 87.4 73.4 -2.6 61% 73.0 79.0 5.0 5.5 0.65
BNB 447 44.4 62.2 0.29 50.5 72.1 61.3 3.0 43% 55.0 61.5 4.0 4.5 0.50
Eth/Sol 25.80 46.8 82.3 0.59 58.6 91.2 74.9 7.4 73% 75.0 60.0 2.5 3.5 1.50

(B) Spot Correlation (09/01/2021 - 04/01/2022)

BTC Eth Sol Avax Ada Matic BNB
BTC 100% 90% 84% 11% 62% 11% 76%
Eth 90% 100% 93% 35% 52% 41% 93%
Sol 84% 93% 100% 31% 59% 34% 93%
Avax 11% 35% 31% 100% -41% 64% 55%
Ada 62% 52% 59% -41% 100% -29% 27%
Matic 11% 41% 34% 64% -29% 100% 56%
BNB 76% 93% 86% 55% 27% 56% 100%

(C) Statistical Arbitrage

Eth/Sol
35.00
Eth/Sol
Current Price 25.80
33.00 Scale into long gamma
31.00 position @ 95th % Mean 24.33
29.00
27.00 High 34.54
25.00
23.00 Low 17.46
21.00
19.00 95th Percentile 31.62
17.00
15.00 5th Percentile 19.12
Optimization Tools
(D) Implied Volatility Term Surface
Eth 100
Fly RR
Implied
65.00 0.45 3.00 95
59.00 0.50 4.00 90
60.00 0.60 4.00
61.00 0.65 4.00 85
62.50 0.75 4.00 80
66.50 1.05 3.00 Long
75
68.50 1.20 2.50 Short
72.00 1.35 2.00 70
74.00 1.40 1.50 Long
65
75.00 1.50 1.00
77.00 1.65 0.50 60
81.00 1.75 0.50 +0 +50 +100 +150 +200 +250 +300 +350 +400
Fwd Vol InterpVol
Sol
Fly RR
Implied
150
100.00 0.45 3.00
145
94.00 0.75 5.00
140
96.00 0.85 5.50
135
97.00 0.95 6.50
130
98.00 1.00 7.00
125
102.00 1.20 8.00
120
105.00 1.30 8.50
111.00 1.35 9.50 115
114.00 1.40 10.00 110
116.00 1.50 11.00 105
118.00 1.65 11.00 100
120.00 1.75 12.00 95
+0 +50 +100 +150 +200 +250 +300 +350 +400
Fwd Vol InterpVol

(E) Implied Correlation

Sol
111%

Usd 0.93 51%

72%
Eth
Volometer Tools (continued)
Term Structure
• Implied volatility trading opportunities are created as the option market is typically right about the
shape but wrong about the slopes along the at-the-money and wing volatility curve surfaces;
• Basis trading opportunities are created during periods of supply/demand imbalance;
• Using the term surface illustrations seen below, price inefficiencies are readily identified across specific
combinations of maturities and strikes:

119.00

114.00

109.00

104.00

99.00

94.00
+0 +50 +100 +150 +200 +250 +300 +350 +400
Fwd Vol InterpVol

Correlation
• Correlation provides further intelligence on individual leg and cross pair pricing accuracy:
USD

ETH

BTC

Gamma Long/Short
• Because implied volatility is affected by many market factors it often does not accurately value
underlying actual volatility and directional movement;
• Long and short gamma trading opportunities are created by inefficient implied to actual volatility
differentials, micro and macro event-variance mispricing, and other underlying market and volatility
price driving variables;
• Intelligent delta hedging strategies monetize volatility price inefficiencies:

Implied Vol Deriv GCR-1 GCR-2 Diff

BTCUSD 82.0 14.0 65.0 70.0 5.0
ETHUSD 100.0 6.0 70.0 78.0 8.0