Cryptocurrency exchange Binance has rolled out trading on Bitcoin options contracts as the influential platform expands its crypto derivatives offering. The new product addition will help traders take advantage of volatility, hedge risk and discover prices through “vanilla” options, which are generally simple and have no special or unusual features
For investors interested in this new trading vehicle, Binance contract follows the European-style options, which may be exercised only at the expiration date of the option, i.e., at a single pre-defined point in time.
The roll-out of options product, quoted in dollar-backed stablecoin USDT, came on the heels of a testnet trial in November 2020 which gathered public about the optimization of margin and risk control mechanisms.
Crypto Derivatives Continue To Gain Momentum
“Bitcoin’s new high of crossing $28,000 underscores the research and hard work invested into the ecosystem which enabled this current rally. The crypto industry’s growth is in good part attributable to a combination of factors, including wider public education and institutional interest, innovations in DeFi protocols and smart contracts, and development of a robust derivatives market. Binance will continue to play a leading role in creating useful products for the community,” said Changpeng Zhao (CZ), Founder and CEO of Binance.
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As more sophisticated investors enter the crypto market, the notice reflects increasing investor interest in trading derivatives which let traders make bets on the price of cryptocurrencies without the need for actual delivery.
Most major crypto venues are setting their sights on popular crypto derivatives offerings on the market, such as BitMEX. Binance, for example, has expanded its offering with the launch of new options on ETH/USDT and XRP/USDT. Derivatives exchange giant CME Group has also its own options product tied to its bitcoin futures, alongside other platforms such as Bakkt, Deribit and LedgerX.
Both futures and options are a way for investors to bet on the trends of bitcoin price without having to actually hold the digital currency, which skirts regulatory and custodian issues. However, futures are in general riskier than options as the only financial liability for the latter is the premium paid at the purchase time. Futures contracts, on the other hand, involve maximum liability.