A 38.43% range week tests how much of a sold-volatility book to shrink
Should the options desk cut its sold-volatility positions outright, or hedge the remaining delta after ETH closed mid-range following a 12.33% fall and a 10.82% rebound?
The market facts are real; the decision maker is illustrative.
The week and the position
In the week of 6 October 2025, ETH fell 8.02%, from 4,514.32 to 4,152.29, inside a 38.43% range: a high of 4,755.00 on Tuesday, a low of 3,435.00 on Friday, and realised volatility of 87.2% annualised. The worst day lost 12.33%; the best day gained 10.82%, with a 4.33% hour on Sunday. Volume ran 1.29 times the prior 12 weeks, funding ranged from 0.01% to -0.0131% per eight hours, and the close sat at 54.3% of the range. An illustrative desk has sold volatility and must decide on hedging.
Judgment
A 12.33% day can carry a short-gamma book through its strikes before any hedge executes, so the sold positions cannot stay at full size. Reduce the book rather than delta-hedge it: the 10.82% best day and Sunday's 4.33% hour make the upside as live as the downside, and buying protection after Friday's 3,435.00 low means hedging after the 12.33% worst day was spent and before Sunday's 10.82% best day had arrived. Hedge only the delta that cannot be closed, and accept a residual gap until the next rebalance.
What would change it
If realised volatility falls for several consecutive sessions and daily ranges narrow well inside 38.43%, the size cut can be unwound in part. If funding's -0.0131% low repeats and forces further deleveraging, cut the remaining short-gamma exposure again.
What sets this case apart
The question is how much of a sold-volatility book to shrink after the move, not which way ETH goes; the hedge price is set by a mid-range close.