Prime ETH VRP [Honest Villain Edition]Credit: Based on the original VRP indicator developed by EdgeTools.
© Engineered by the proprietary trading division at CMZN LTD. ŞTİ.
© Lead Quant: A. Arda UZAN / "The Honest Villain"
© Web3 Research Arm: Arol DAO (aroldao.eth)
The Honest Villain's ETH VRP
Measures the Variance Risk Premium using Deribit's ETH DVOL vs. 365-Day Realized Volatility.
Includes Z-Score and Percentile ranking for tail-risk identification.
In crypto, one thing is mathematically certain:
FAT TAILS ARE TOO FAT.
Trades that incorporate naked shorting of options are often referred to as "widow makers" for this exact reason. To survive, sellers of volatility demand an additional premium to compensate for this tail risk. This manifests as Implied Volatility (IV) consistently over-estimating Realized Volatility (RV).
How to read this tool:
Positive VRP (High): Options may be overpriced. The market is fearful, and premiums are rich.
Negative VRP (Low): Options may be fairly priced or discounted. Realized volatility is thrashing harder than the options market is pricing.
Why this script exists:
I engineered this because I could not find a plug-and-play VRP indicator specifically calibrated for Ethereum's microstructure.
* **Engine:** Uses the Garman-Klass estimator (OHLC) for precision, not just Close-to-Close.
* **Math:** Adjusted for the 365-day crypto trading year (vs. the TradFi 252).
* **Context:** Adds Z-Score and Percentiles to identify statistical extremes.
Deployment:
For best results, apply this indicator to the most liquid ETH/Stable spot market to ensure the Volume Footprint and VRP align.
Recommended: BINANCE:ETHUSDT
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