Leading exchange ByBit was the first to bring USDC options to the markets, now the exchange is expanding its offerings, by adding Ether (ETH) and Solana (SOL) contracts. It already offered USDC-based BTC options.
As a way of celebrating this momentous occasion, ByBit has opted to cut trading fees by 66% for 30 days if a trader registers before Oct. 4, 2022 10AM UTC. Once the new contracts launch, ByBit clients will be able to trade multiple options contracts on ETH, SOL, and BTC in both options and perpetuals via portfolio margin.
The portfolio margin system is a risk-based model made for experienced traders, which includes market makers and institutional clients that need optimal capital efficiency. All the options are European-style cash-settled options, which are settled when the contract expires.
Ben Zhou, the co-founder and CEO of Bybit, commented,
“Our users asked, and we answered…After the inauguration of our first-in-market, USDC-settled options earlier this year, adding ETH and SOL contracts was the natural next step. Our options platform is already a major competitor in the crypto trading helped by Bybit’s deep on-screen liquidity, minimal slippage, and robust >100K TPS trading capacity/matching engine.”
Easy Settlement With ByBit
ByBit was the first exchange to offer options that are margined and settled in USDC, which makes it simple to trade easily, and not worry about owning the underlying crypto assets. In addition, there is no need to hedge underlying collateral, because USDC is pegged to the USD.
With ByBit’s options structure, all contracts are settled in USDC.
Options contracts are a great hedging instrument, and unlike futures contracts, which must be transacted at the expiry date, options aren’t mandatory to execute if the market price goes against the trader.
In other words, trading options, or using them as a hedging instrument is low, as the main cost is the premium paid when they are purchased.
ByBit allows the use of BTC, ETH, and USDT as collateral, which makes it easy for crypto owners to trade and hedge. In addition, with ByBit’s risk-based margin system, losing positions are offset by winning ones, so the overall capital efficiency is improved.
Fading Volatility With Options
Options can be used to speculate, but they are also a way to suck some of the volatility out of a position. In fact, options can be used as a sort of crypto portfolio insurance. Buying options that are above or below market price, depending on what kind of position you have, are less expensive, and give you protection in case there is a big move in the markets.
The premium you pay is influenced by a number of factors, including market prices and time until expiration.
For example, let’s say you have a large position in BTC. If you want to protect against further losses, you can buy put options below market price, with a six month expiration. If the markets fall over the next six months, and go below the strike price, you will get paid, and the portfolio losses will be offset by the option profits.
There May be Big Moves Coming
There is no doubt that many crypto investors have been impacted by the moves down in 2022, but there could be more coming. As Bitcoin has become a mainstream asset, more and more investors trade it like a ‘risk’ asset, much like stocks.
While the long term outlet for Bitcoin, and crypto, is great, given the current run to liquidity in global markets, combined with central bank tightening, cryptos may be sold along with every other asset besides fiat currency.
While some people are content to just hold cryptos for the long haul, others want to protect the market value of their portfolio. Options are a great way to have some protection, in case the crypto markets take another leg lower in the medium-term.