Video lesson · OptionsDVOL, the bitcoin volatility index: how to read it
The bitcoin volatility index — implied volatility index for BTC and ETH. The lesson takes 2:09; its full text is below the video.
Narrated in Russian. English subtitles are on by default.
DVOL in short
What does DVOL show?
The line shows DVOL, the annual volatility of BTC or ETH that the options market expects, in percent. The line's color shows how high the reading is relative to the index's own history: gray is low, light is typical, amber is high, red is very high. The gray line is a moving average, when turned on. A coral strip along the bottom edge means the index jumped within a day: after such hours price usually keeps moving much more than usual; a diamond on the price chart marks where such a stretch begins.
How to read DVOL?
- Rising DVOL means the market expects bigger moves and pays more for options.
- Low DVOL means calm and cheap options.
- A sharp spike usually comes with a crash or a fast rally.
- A coral strip: the storm is not over, the next day usually brings a big move in either direction. Brighter means a stronger jump.
How to use DVOL?
- A long stretch of low DVOL means the market expects no move; such quiet periods are worth marking while they last.
- DVOL rising on a drop shows fear; rising on a rally shows chasing.
- On other coins the indicator shows BTC; ETH can be chosen manually.
- Under a coral strip a wider stop makes sense, and after the first burst expect more big moves rather than calm.
What do you often see on DVOL?
- A DVOL spike more often marks a sharp move that has already happened than warns of one.
- A long flat, low DVOL does not warn of a burst on its own: the following days are usually calmer than usual.
- High DVOL shows up at both bottoms and tops: neither highs nor sudden jumps have marked trend changes on their own.
- Describes the market's state, not its direction: on its own it does not tell you where price goes next.
Where can I find DVOL?
In the Liqwall terminal: the Indicators button, the Options section, DVOL. The “Open in the terminal” button on this page opens the chart with it already added.
Lesson text
0:00What DVOL is
The options market shows in advance how big a move it expects. You can see it with a single line. Meet DVOL, the expected move index for Bitcoin and Ether.
0:12How to add DVOL to the chart
Open the indicator list, the Options section, and choose DVOL. The indicator appears in a separate pane below the price chart.
0:20How to read DVOL
The line shows how much movement the options market prices in for the year ahead, in percent. The line color compares the value with the index's own history. Gray is a calm level. Amber and red are high for its own history.
0:34DVOL settings
There are two main rows in the settings. Index picks the index: the chart coin, Bitcoin or Ether. SMA turns on an average line. It helps tell a short spike from a new normal level. Watch two things. How long the line stays flat, and how sharply it goes up.
0:54An example on a real chart
Let's look at a real example. From August 1 to August 18 DVOL stayed flat for almost three weeks, between 34 and 36. Meanwhile Bitcoin moved in a narrow range, from 62 to 65.5 thousand dollars. The market was calm and options were cheap.
On August 19 the calm ended. In three days Bitcoin rose from 64,700 to 79,500. DVOL rose with it to 47, and the line turned a warm color. You can clearly see the long calm on the index turn into a strong price move.
DVOL works well together with other indicators from the Options section. ATM IV shows the same expectations by term: the week against the month. IV Skew shows which way the market is hedging. Gamma Exposure hints whether the market will dampen a move or speed it up.
DVOL is most useful when the line stays low for a long time. That is the time to get ready for a breakout from the range.
2:03The takeaway
DVOL shows how much movement the market expects.
Add the indicator to the chart and look at it on your own coin.Free account — no card needed.