OKX Exchange Review – Bitcoin Options Edition

OKX Exchange, formerly OKEX, has been a prominent and widely accepted crypto exchange since its inception in 2016, possessing a significant presence. In light of its recent makeover and platform enhancements, we deem it appropriate to provide an updated evaluation of OKX in light of the thrilling new developments.

Using its expertise in the spot market, OKX provides its users with various opportunities, including Futures, perpetual swaps, and options markets. Beyond its traditional appeal to active crypto traders, the platform has expanded its offerings to include a dedicated earn section access to an NFT marketplace. Each feature provides traders with unique opportunities for trading, hedging, earning, and navigating the ever-changing crypto landscape.

Within the scope of this OKX review, we will focus on options trading only. Therefore, if you are a spot or futures trader, you can extend your presence in crypto options trading; this article could be helpful to you.

OKX options trading basics

Crypto options trading represents a sophisticated trading strategy that enables traders to make speculative predictions about the price fluctuations of cryptos. In simpler terms, it is a contract between a buyer and a seller in which the buyer has the right to acquire or sell an asset at a predetermined price and time.

Acquiring options requires a smaller margin than purchasing crypto futures. This distinction is because options contracts do not directly reflect the price of the fundamental asset, as futures contracts do. Instead, the value of an option contract is determined by the strike price. This value, known as a premium, is determined by several factors, including the option's intrinsic value and proximity to or distance from the money.

To begin trading options, traders must understand the basics, which include the strike price, the expiration date, and the premium.

There are two primary options available: American and European. American options can be exercised at any time before the expiration date, whereas European options restrict exercise to the expiration date alone.

On the OKX platform, you have to exercise on European options only.

OKX options key features

Regarding options trading, OKX would be great as many assets have many trading opportunities. 

In this section, we will see the details of the OKX features for options trading:

Coin availability

OKX simple options contracts work like traditional options trading, but traders can benefit from the simplified interface. Also, the platform is suitable for beginners and advanced traders, so everyone can easily participate and make money.

However, OKX currently offers BTC and ETH contracts only. Therefore, it would not be a good choice if you are looking for a trading opportunity beyond these coins. 

Call and put options

OKX options trading is available for call-and-put options, so investors can profit from bullish and bearish sides. However, the platform follows the European style and can only be exercised at the date of expiry.

Contract expiration

OKX implemented a variety of contract expirations so that short-term, medium-term, and long-term traders can take part in it.

Based on our findings, the contract expiry time is as follows-

• One day
• Two day
• Weekly
• Bi-weekly
• Monthly
• Quarterly
• Bi-quarterly

OKX simple options interface

OKX options trading is available under the “Derivatives and margin trading” section. A new page with options trading details will appear once you click the options trading from that menu.

On the top side, you will see BTC and ETH with the live price, just above the details of trading information like open orders, history, close orders, etc. On the downside, the options trading details are available, distinguished by the expiry date.

The platform interface is simple so that novice traders can understand it. Also, the platform has a detailed guide about options trading in the education section, which could be effective for new traders.

Advanced Options Trading Tools

OKX collaborated with another company, SIgnalPlus, to provide an in-depth outlook and tools for options trading.

As per our findings, the top trading tools for options trading will be like this-

• Comprehensive options pricing, analytics, liquidity aggregation, and multi-vendor connectivity.
• Embedded algorithms- The ‘Smart Dealing' feature enables traders to execute complex multi-legged orders, improving execution quality and mitigating slippage.
• Utilize simulation and scenario analysis tools in advance to stress-test Profit and Loss (PnL) and exposure, enabling traders to make informed decisions.
• The ‘Dynamic Delta Hedge' (DDH) functionality automates delta hedging.
• Obtain real-time updates on your trades and transactions via Telegram text notifications.
• Enjoy a fully customizable panel view that displays inventory, order history, and real-time market information.

Basics of options:

Underlying asset

The underlying asset for trading on which derivatives contract’s price is based, including commodities, financial assets, interest rates and composite indices. For example, the underlying asset of Bitcoin options is BTC/USD index., Ethereum Options is ETH/USD index and the underlying asset of EOS options is EOS/USD index.

Expiration date:

the date on which the option expires.

Exercise price (or strike price):

the price at which the option holder can buy or sell an underlying asset when exercising a call or put option respectively.

Contract Types:

options are categorized into different styles. They can be classified into European, American and vanilla options given their exercise styles.

Option premium:

the price at which an option is bought or sold.

OKX options are following the European Option meaning it can only be exercised on its expiration date.

Options can be classified into in-the-money (ITM), at-the-money (ATM) and out-of-the-money (OTM), depending on the difference between the strike price and the price of the underlying asset.

Both the option buyer and seller can choose to close their open position(s) prior to or upon the expiration date.

Why should you use OKX options trading?

Many traders feel confused about options trading and struggle to consider whether they should use it or not. Besides spot and futures trading, you may consider spot trading profitable for the following purposes:

Speculation

Speculation involves placing a bet on the future direction of a crypto price. For example, a speculator may believe that the price of a crypto will rise, and instead of buying it directly, they might select a call option. 

This choice appeals to certain traders because options enable them to amplify their potential returns by using leverage.

Hedging

Hedging entails safeguarding oneself against potential losses in a bet or investment by executing balancing or compensatory transactions.

When utilizing options for hedging, the primary objective is to mitigate risk without incurring excessive expenses. One can limit the adverse risk by employing put options while cost-effectively retaining the opportunity for gains. 

For individuals engaged in short selling, call options can serve as a means to restrict losses in the event of an adverse movement in the underlying asset's price.

Is OKX options trading safe?

Trading in the crypto market involves a high level of risk that a trader should consider. Our findings show that OKX is safer to buy, sell, and hold cryptos. 

The 2-factor authenticator, wallet whitelisting, passkey, authenticator app, and phishing code would be the significant sign of the data protection of this platform.

In addition, implementing multi-signature features, 24/7 customer service, cold wallets, etc., could be another sign of funds safety.

Moreover, OXX is a multi-regulated platform authorized to provide services in various regions, which could be another sign of a fund's safety. Other information about the regulation is mentioned here-

• OKX Bahamas FinTech Company Limited, a Bahamas-registered company 
• OKX Hong Kong FinTech Company Limited, a Hong Kong-registered company
• OKX Serviços Digitais Ltda., a Brazil limited liability company
• Aux Cayes FinTech Co. Ltd., a Seychelles-registered company 

Conclusion

Trading crypto options can increase the inherent volatility of an already tumultuous crypto market. 

Before considering leveraged trading and putting your hard-earned money at risk if you're new to trading in any form, it's essential to educate yourself exhaustively.

Options can provide a path to profits under various market conditions or serve as a tool for risk management. However, it is crucial to recognize that not all traders are successful, so you should not presume the odds are in your favor without careful thought.

Introducing conventional financial instruments into the crypto industry can be a double-edged sword. It could result in a substantial influx of capital, essential for adoption, and could pave the way for financial institutions to make larger investments.

OKX Options offering:

Options give contract holder the right to buy or sell an underlying asset on a fixed day in the future. The contract holder (buyer) can choose to exercise the option if she or he can benefit from doing so. The contract writer (seller) will have to pay a relevant amount to the contract hold If there is no benefit from exercising, the buyer can choose not to exercise it. The seller does not need to pay anything in this case.