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 has offered USDC-based BTC options.
As a way to celebrate this momentous occasion, ByBit has opted to cut trading fees by 66% for 30 days if a trader registers before October 4, 2022 10AM UTC. Once the new contract is launched, Bybit customers will be able to trade multiple options contracts, both options and perpetual, on ETH, SOL and BTC through Portfolio Margin.
The Portfolio Margin System is a risk-based model designed for experienced traders, including market makers and institutional clients who require optimum capital efficiency. All options are European-style cash-settled options, which are settled when the contract expires.
Ben Zhou, co-founder and CEO of Bybit commented,
“Our users asked, and we responded… Following our first in-market opening, earlier this year, adding USDC-settled options, ETH and SOL contracts was the natural next step. Our options platform is already in place. It is a major competitor in crypto trading, helped by Bybit’s deep on-screen liquidity, minimal slippage and robust >100K TPS trading capability/matching engine.
Easy Settlement with ByBit
ByBit was the first exchange to offer margin and settlement options in USDC, making it easy to trade with ease, and not having to worry about owning the underlying crypto asset. Furthermore, there is no need to hedge the underlying collateral, as USDC is pegged to 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 traded at the expiration date, it is not mandatory for the trader to execute the option if the market price goes against the trader.
In other words, trading options, or using them as a hedging instrument, is less likely because the main cost premium is paid when they are purchased.
Bybit allows BTC, ETH and USDT to be used as collateral, making it easier for crypto owners to trade and hedge. Furthermore, with Bybit’s risk-based margin system, losing positions are offset by winning, therefore improving overall capital efficiency.
fading volatility with options
Options can be used to speculate, but they are also a way to remove some volatility from a position. In fact, options can be used as a kind of crypto portfolio insurance. Buying options above or below the market price, depending on the type of position you have, is less expensive, and gives you protection in the event of a major market move.
The premium you pay is affected by several factors, including market value and the time until expiration.
For example, let’s say you have a large position in BTC. If you want to hedge against further losses, you can buy a put option below the market price with an expiry of six months. If the market falls over the next six months, and moves below the strike price, you will receive a payout, and the portfolio’s loss will be offset by the option’s profits.
Big steps to come
There is no doubt that many crypto investors have been affected by the downward move in 2022, but there may be more to come. As bitcoin has become a mainstream asset, more and more investors are trading it as a ‘risk’ asset, much like a stock.
While the long-term outlet for bitcoin and crypto is great, given the current run for liquidity in global markets, with central bank strictures, crypto can be sold with every other asset other than fiat currency.
While some people are content to hold crypto for the long term, others want to protect the market value of their portfolio. If the cryptocurrency market takes another leg down in the medium term, options are a great way to hold some security.