Cryptocurrency Exchange OKEx Launches Options Trading

The spot and derivatives exchange OKEx is launching options trading for digital assets later this month as part of an upgrade to its platform architecture.

The product addition will help traders take advantage of volatility, hedge risk and discover prices, Enzo Villani, OKEx's head of international strategy and innovation, told Benzinga. 

OKEx is a leading digital asset exchange for institutional and retail traders. The firm leverages blockchain technology to scale the delivery of fair and efficient markets for emerging asset classes.

The firm is best known for its early entry into the cryptocurrency derivatives space. In October, OKEx launched linear crypto futures settled in the Tether Stablecoin with leverage between 1 and 100x.

High Volatility, High Demand

With the rise of interest in cryptocurrency, retail traders and institutions have demanded solutions to either take advantage or hedge against the volatile nature of the underlying assets.

Villani, who previously headed Nasdaq Corporate Solutions, said the addition of buy-write options trading is a natural evolution of OKEx's product portfolio.

It “allows people the ability to participate in the market at different levels,” he said.

OKEx intends to enhance the depth and breadth of the digital asset markets with transparent and flexible derivatives that are priced to reflect the entire market, Villani said. 

“We are really focused on security and risk management." 

OKEx takes feeds from multiple exchanges so that option pricing accurately reflects the entire market.

"Pricing is based on the Black-Scholes model and [the] entire market — not just one Bitcoin quote from one exchange," Villani said. 

Liquidity, Information Asymmetry, Normality

In order for the cryptocurrency market to stabilize and evolve, markets must be transparent, liquid and diverse in product, Villani told Benzinga. 

OKEx’s core options products are centered around cryptocurrency indices like BTC/USD and offer the following features:

• Call and put options contracts
• Weekly, biweekly and quarterly expirations
• 0.1 contract multiplier and 0.0005 BTC tick size
• European exercise and settlement into Bitcoin

“We’re still in the early days. Adding the options market allows people to trade something that they’re used to,” Villani said.

Going Forward: Increased Adoption

Derivatives are going to help define the subsequent value of an underlying asset, the OKEx exec said. 

OKEx pioneered C2C, spot, futures, swaps, and options trading for digital assets under the same roof, spearheading efforts to improve discovery and enhance liquidity for all levels of market participants.

“This is the part of the adoption — basically moving into a market price mechanism to reflect fair market prices of the underlying assets, lowering the risks of market manipulation and margin loss against abnormal volatilities,” Villani said. 

Photo courtesy of OKEx.