Calculate Bitcoin Price Movement Implied by DeriBit's Option Volatility Index

[PLUS] Calculate Bitcoin Price Movement Implied by DeriBit's Option Volatility Index

April 8, 2023, 7:11 p.m.by CryptoDataDownload

Bitcoin Volatility Index

Deribit's Implied Volatility Index (DVOL) is constructed in the same manner as the more well-known VIX (which measures volatility of the stock market through options.) DVOL is "forward looking"; meaning that it measures the expected volatility of BTC (or ETH) over the next 30 days as calculated through option activity. By default, the index represents implied volatility over the 30 day window, and so we will need to scale the volatility from 30 days down to 1 day. DVOL is calculated continuously and expressed as an Index, and we have the time series of the volatility index in our data depository. (More technical examinations of the Index can be found in DeriBit's Insights section).

The Code

We will use Python to connect to the DeriBit API and retrieve the latest implied 30 day volatility calculation (DVOL). Then, we will use a function to convert this 30day metric into a one day metric to make it more meaningful for daily expectations. (Python script will be configurable so that you can set for any time horizon other than 1-day). Of course, every line of code is commented so that you can understand the line of thought; and you are free to customize to your own purposes.

Example Result

We have the result as of 4/8/2023 showing an option(s)-expected daily move of ~2.91%.

Example script result

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