The cryptocurrency exchange, presently ranked third-largest by average daily trading volume, has hinted that the options contract will be settled in Bitcoin (BTC).
By investing in a call option, which offers a right to buy, or a put option, which offers a right to sell, a trader can safeguard his investments from market volatility.
Options contract permits a trader to buy or sell an asset at a predetermined price, commonly referred to as “strike price.”
In order to receive the preference, a trader has to pay a premium for the preferred option contract. The “strike price” is assessed on or before the expiry date of the contract.
As per OKEx, its Bitcoin options contract will follow the Black Scholes theory, a model which enables the value of an options contract that track an underlying asset.
The model has been used since early 19702. The contract will make use of live data and is incorporated along with the overhaul of the trading infrastructure of the platform.
The roll out of options along with prevailing margin trading, perpetual swaps and futures markets will enable OKEx traders to diversify their hedging and overall trading strategies. In this regard, Lennix Lai, financial market director of OKEx, stated:
“Options are a unique instrument that enables traders to manage, price and hedge the volatility of crypto assets […] to take advantage of more than just market direction. We welcome clients from different segments, especially from our institutional clients, who have shown the fastest-growing demand in derivatives trading, especially on futures and perpetual swaps.”
Initially, the options trading platform will be opened to only few selected traders. From January 9, 2020 onwards, the options contract will be open to public access on January 9, 2020.
Of laste, the Chicago Mercantile Exchange (CME) Group has opined that it anticipates huge demand for its Bitcoin options contract in Asia.
Tim McCourt, CME Group’s global head of equity index and alternative investment products, has pointed out that in contrast to futures, which offers traders a “one-for-one exposure,” options offer ether downside protection and upside exposure with a small investment.
Last month, OKEx rolled out Bitcoin futures contracts and intends to launch comparable contracts for other crypto assets such as Ether (ETH), EOS (EOS), Litecoin (LTC), XRP and Tron (TRX) and Bitcoin Cash (BCH).