Options trading has been an integral part of traditional finance for a very long time, and now it is coming for Bitcoin and other cryptocurrencies.
I am talking about Bitcoin options trading.
I think you are already aware of it but are looking for more information on Bitcoin options trading.
If that’s the case, I must say you are in the right place.
Bitcoin and crypto options trading are catching up. Especially amongst people who have well-established crypto portfolios so that they can hedge the risk of their positions.
Therefore, when trading options, one needs to find a reliable crypto exchange. Let’s have a look at some of the best crypto exchanges for Bitcoin options.
Best Cryptocurrency Exchange For Options Trading
|Best Crypto Options Exchange||Quick Links|
|Deribit [10% Fee Discount]||Try Now|
|FTX Exchange [5% Fee Discount]||Try Now|
|Binance Options||Try Now|
|Delta Exchange||Try Now|
|Binance JEX||Try Now|
Usually, people who get to know about options are generally confused about how and where to trade Bitcoin/crypto options?
That’s where we come in and now have made this curated list of best Bitcoin option trading platforms from where you can quickly learn how to trade BTC options and also trade on them !!
Moreover, you should know that neither all crypto exchanges are created equal, nor all exchange platforms offer Bitcoin options contracts for trading.
Bitcoin options exchanges are still a niche business, and not many established players have entered this space. But whatever Bitcoin options exchanges are available out there are suitable for the job.
So here are they:
Deribit is the most preferred cryptocurrency exchange for Bitcoin futures and options trading.
It is based in Amsterdam, Netherlands, serving the crypto community with its crypto options products since 2016.
Due to the less availability of crypto options, Deribit has become the go-to options exchange for many cryptocurrency traders with well-established portfolios.
Further, Deribit provides European-style options, meaning such options can only be exercised at the time of expiration date. Also, the settlement happens in cash instead of the underlying asset, but this shouldn’t be a problem for anyone as it still does the job for you!
Lastly, as of now, Deribit facilitates options trading of Ethereum and Bitcoin on its platform where these purchase fees are applicable 0.04% of underlying or 0.0004 BTC or ETH per option contract.
FTX is a Hong Kong-based derivatives exchange founded in 2019 and is backed by leading crypto players, including Alameda Research (global crypto liquidity provider), Binance, Bitfinex, Circle, etc.
The exchange ranks consistently in the list of top 5 derivatives exchanges by trading volume. The derivatives segment offers trading in over 250 perpetual and quarterly futures, leveraged tokens, BTC options, and MOVE contracts with a leverage of up to 101X.
FTX offers trading in only European-style Bitcoin options, which you cannot exercise early. All options are cash-settled in USD on the expiration date.
The trading fees on the platform are divided into six levels- starting from 0.020- 0.000% as maker fees and 0.070- 0.040% as taker fees.
Binance is the leading global cryptocurrency trading platform that offers trading in a wide range of crypto assets. And has the most liquid market for all assets in both the spot and the derivatives marketplace.
It allows you to trade crypto options through its Binance Futures platform, which was launched in 2020. You can take leverage of up to 125X to trade cryptocurrency futures and options contracts.
Binance allows buying and selling of European-style vanilla Bitcoin options, which can only be exercised on the contract expiration date. The option contracts are priced and settled in USDT.
The options trading fee has two parts- the transaction fee and the fee to exercise.
- Transaction fee: Index price * Transaction fee rate, i.e., 0.03% of the underlying asset value
- Exercise fee: Exercise price * Fee to exercise rate, i.e., 0.015% of the underlying asset value
The fee amount will not exceed 10% of the transaction fee, and in the exercise fee, the fee amount will not exceed 10% of the profit gained by exercising the option.
#4. Delta Exchange
Delta Exchange is a Singapore-based derivatives exchange started in 2018 and is backed by some of the big names in the cryptosphere, including Kyber Network, AAVE, Sino Global Capital, CoinFund, etc.
It offers a wide range of trading products in the derivatives segment, including futures (perpetual and with expiry) on BTC and 50+ altcoins, European options, MOVE contracts, etc.
You can buy and sell, call & put options on BTC, ETH, XRP, LTC, BCH, BNB, and LINK in the options segment. One of the first crypto exchanges offers options trading in a wide range of crypto assets with up to 100X leverage.
The exchange charges meager fees for options trading, which is 0.05% of the transaction amount as taker and maker fees for options contracts. And, it has a fixed fee of 0.05% as settlement fees on the platform.
Quedex is another European-style options trading platform that allows you to trade Bitcoin options and settle in cash.
The crypto exchange itself has less liquidity but can be said to be decent in terms of options niche, and the exchange started serving the crypto markets only in December 2017.
Apart from that, Quedex is regulated entirely by the Gibraltar Financial Services Commission and allows you to trade inverse options at a nominal price of $1.
The fee charged for liquidity makers is zero, and for takers, it charges 0.03%, which is quite low. Furthermore, it allows you to trade in three types of options of different maturities i.e.
- weekly, expiring every Friday,
- monthly, expiring on the last Friday of the month,
- quarterly, expiring on the last Friday of March, June, September, and December.
LedgerX is a US-based exchange offering Bitcoin futures, options, and swaps since October 2017.
They were the first fully regulated exchange by the US Commodity Futures Trading Commission (CFTC) after a rigorous regulatory process of 3.5 years.
Initially, the exchange was only open for accredited and institutional traders, but recently, they opened doors for retail traders.
But mind you, only US customers can use this exchange after a rigorous KYC. So if you are someone who is in the US and has a portfolio of BTC to hedge your risk, LedgerX is the way to go.
#7. Binance JEX
The exchange was started as JEX in 2018, offering spot and derivatives trading services, and was later acquired by Binance in 2019.
In the options segment, it offers two trading setups, standard and professional. Under the standard set-up, the exchange offers to trade in BTC, ETH, LTC, EOS, and BNB options only on a few predetermined options contracts with a leverage of up to 15X.
Under the professional trade setup for options trading, you can only trade in Bitcoin options but will have the flexibility to choose the strike price and can use crypto leverage of up to 110X.
The per-contract fee for options contacts is 0.20% for both market maker and taker. And, there is a discount of 50% on trading fees when paying using JEX tokens.
What Is Bitcoin/Crypto Options Trading?
Options trading is not a new concept, but I believe some of you might not be aware of its benefits.
So allow me to help you out.
Options are financial instruments that derive their value from other underlying asset prices. These assets can be stocks, bonds, indexes, or cryptocurrencies.
As the name suggests, options trading gives an option or choice to the trader to buy or sell an asset in the future at a pre-agreed fixed price irrespective of whatever the asset price is at the time expiry.
Complicated? Let me explain with an example.
Let’s say you have a healthy-looking Bitcoin portfolio, and you are satisfied with it. But you are also aware of the volatility of the BTC market and are expecting a bear market.
You are skeptical of this impending bear market and are unsure whether your healthy-looking portfolio will continue to look healthy.
In this case, you would want to minimize the risk of your portfolio and would not want to lose the unrealized profits, especially if the bear market never ends.
Enter Bitcoin options for it.
You can purchase Put Options for Bitcoin. Put options are the financial instruments that will kind of lock the selling price for your bitcoins in the future. Having put options in such a case is like having portfolio insurance in a declining market situation.
Put options can be bought easily through a Bitcoin options exchange where you need to pay a small premium or fee to purchase such put options.
Now, let’s say you have 10 BTC, which you bought each worth $10,000, and the current market price is $12,000. You are expecting the price per BTC to hit $8,000 in the future. So, you have purchased 10 Bitcoin put options for $50 each at a strike price of $10,000 per BTC.
After some time, your skepticism comes true, and the BTC price enters into the bearish zone and is lingering around $8000 (strike price), and you want to exit your position.
So, in this case, you can exercise your put options and still sell Bitcoin for $10,000 per BTC.
In this scenario, you realized all the profits from your BTC portfolio regardless of the market BTC price. Thanks to BTC, put options for it.
Also, notice you were able to exercise these put options because you had already paid a premium of $500, i.e., $50 per put option, which I think is a cool deal to hedge against your portfolio risk.
If not having a put option, you would have lost 20,000, i.e., $2000 per BTC, because Bitcoin was later trading at the $8000 mark.
So that way, you enjoy the insurance with Bitcoin put options.
But remember, Bitcoin options holders are not obligated to do this in case the price of BTC shoots up in the future. That’s why it is called an option.
Still, for the seller of a put option, it is an obligation now to buy the underlying asset, i.e., BTC, if the buyer decides to exercise his/her put option in a scenario of a Bitcoin price downturn.
Some More Basics About Bitcoin Options
In general, there are two types of options, known as Puts & Calls.
Traders, hedgers, etc., use the call option (right to buy) or Put option (right to sell). These are also called options contracts and consists of broadly four essential components:
- Size: It means the size or the number of options contracts anyone needs to buy, either calls or puts. Sometimes also referred to as the lot size.
- Expiry Date: The date before which one can exercise the option. After this day, the options expire, and the holder no longer enjoys the right to exercise the contract.
- Strike Price: The price at which the asset will be bought or sold if the asset’s actual price in the market hits it.
- Premiums: It is like a fee or the cost investors pay to buy different kinds of options. The premium is affected by the underlying asset’s volatility and intrinsic value.
When you pay a premium for a call option, it means you are paying to exercise the right to buy under the expiration date. On the other hand, when you pay for put options, it means you are purchasing the right to sell an asset once the Bitcoin option expires.
So using Bitcoin options, Bitcoin owners usually do these two types of trades:
- Protective Put: It is buying put options for the bitcoins you already own. Buying this ensures your BTC portfolio is against the potential downturn. If the downturn doesn’t happen, you only lose the option premium you paid to purchase these puts.
- Covered Call: In this case, too, you own the BTC and are sure of the price movements in the future. Using this situation, you can make extra income from your holdings.
So when the call option you are selling expires and the strike price is not reached, you would have earned extra through the premium of the call option you sold.
On the other hand, if the strike price is reached and the buyer of the call option would want to exercise the contract, and as a seller, you would be obligated to sell your bitcoins.
Cryptocurrency options trading is still a niche, and not many cryptocurrency exchanges provide this service.
Partly the reason for this is the low daily trade volume of the options market. The liquidity is low because not many cryptocurrency investors have established crypto or Bitcoin portfolios for which they would want to hedge their risk. That’s why the liquidity of BTC options is generally low because of the lack of demand itself.
Therefore, you need to choose a trustworthy bitcoin options exchange for purchasing options, as it offers deep liquidity and enables safe trading in the Bitcoin options space.
As the market matures, trading crypto options will become a thing; after all, who doesn’t want to mitigate their portfolio risk.