Risk Warning:Trading digital assets involve significant risk and can result in the loss of your invested capital. You should ensure that you fully understand the risk involved and take into consideration your level of experience, investment objectives and seek independent financial advice if necessary.
- Hassle free account creation process
- Have fund insurance protection
- Reasonable fees
- Not Beginner friendly
- BTC Deposit only
Table of contents
Deribit is a cryptocurrency exchange that offers futures and options trading on the platform, which allows cryptocurrency traders to trade with up to 100x leverage. Moreover, the platform was founded in Amsterdam in June 2016 but later on relocated to Panama.
Deribit provides the large options volumes when it comes to cryptocurrencies.It simply offers the deepest BTC and ETH options volumes in the market . When looking at Deribit BTC options volume. As of January 2021 Deribit had over $2.5 billion in options volume daily trading according to Coinmarketcap.
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What is Deribit Options?
‘Options’ are financial instruments that are derivatives that benefit from the valuation of the underlying securities. Stocks are a good example of such assets. The Options Contract provides a special incentive for the purchaser. They will either purchase or sell the underlying asset – depending on the type of contract they hold. Futures obliges the investor to buy the asset or the seller to sell the asset and to have a clear future date and price. In the case of options, the buyer is not obligated to purchase or sell the asset whether he or she chooses not to do so.
Call options: Within a particular timeframe, the holder is able to purchase the asset at a stated price.
Put options: Within a specific timeframe, the holder is able to sell the asset at a stated price.
Each option contract contains a specific expiry date by which it is necessary for the holder to exercise his option. The price set for an option is called the ‘strike price’. With the use of online or retail brokers, purchasing and selling options are typically done.
Investors pay a premium when it comes to purchasing Bitcoin or Ethereum options. They do it for the opportunity in the future to be able to buy or sell Bitcoin at a set price. This essentially provides an interesting method of longing for BTC/ETH or shorting it. In a declining market, it gives owners an opportunity to acquire gains, plus multiply their profits in a bull market.
As is the case with all options, holders of Bitcoin and Ethereum options can exercise their options until the expiry date of the contract. The option position will close after this date. Alternatively, they can sell their position at the current market price if a trader decides to leave the position earlier.
Deribit Options Type
Deribit provides cash-settled European style options.
Options of the European style are only exercised at expiry and cannot be exercised before. This will occur automatically on Deribit.
Cash settlement means that the writer of the options contract will pay any profit due to the holder at the expiry of the contract, instead of transferring any assets.
The relevant crypto price can also be seen in USD, however. Using the latest futures rates, the price in USD is determined. In addition, on the platform, the implied volatility of the option’s price is also shown.
The right to buy 1 BTC or 1 ETH at a specific price (strike price) is a call option and the right to sell 1 BTC or 1 ETH at a specific price is a put option (the strike price).
You are expected to maintain at least 3% margin on your position. Your positions will be immediately liquidated if the margin goes below the maintenance margin, before the margin balance reaches the maintenance margin.
You then have an opportunity to select a exercise date that compliment your trading strategy:
- 2 days
- 4 days
- 11 days
- 24 days
- 53 days
- 144 days
- 235 days
Deribit Options Fees Structure
For options trading, the underlying fee is 0.04% per option contract for both makers and takers.
Other applicable fees included the following:
- 0.02% Options
- For options, the fee is never more than 20% of the option’s value.
- 0.1% of the underlying option contract
Security wise, Deribit stores over 99% of customers BTC funds in cold storage. This means that at any given time, there is only 1% of Deribit’s total BTC holdings, and therefore users holdings, in a hot wallet for daily exchange operations.
The Deribit insurance fund ensures payout to profitable traders even when liquidated traders go bankrupt.The insurance fund does not cover the losses of liquidated traders.It is funded by the liquidation fee added to all liquidation orders (not just the trades resulting in bankruptcy).
We love the fact that Deribit provides the deepest liquidity in the crypto options industry, as it allows small and large traders to feel secure trading. As far as safety is concerned, Deribit holds up to 99 per cent of the customer’s funds in cold storage. Whatever remains is held solely for the purpose of facilitating withdrawals. Moreover, this forum for trading options is very proud of its strict internal security measures. In short, Deribit shows high security measures, with zero attacks occurring in its years of service since it was released. As a matter of fact, traders have the option of renting a server to minimize latency times to only ~0.1ms.