Binance launches European-style vanilla options
Binance has launched “European-style” Vanilla Bitcoin Options contracts. The options are priced and settled in USDT, and offer users more choices to diversify their portfolio and manage their market exposure. Users can both buy the options for hedging and trading, as well as write and sell options as an issuer.
The launch follows the completion of a testnet trial in November 2020 which gathered public feedback to further enhance user experience, such as the optimisation of margin and risk control mechanisms. Users can enjoy a secure and liquid trading platform that Binance has become known for. Institutional and advanced users requiring a broad range of products can benefit from efficient liquidity and collateral management with a convenient single-wallet solution across Binance’s many products.
With the increase of institutional demand and advancements in cryptocurrency infrastructure, there is a fast-growing need for quality hedging and liquidity products. Market data indicate daily trading volume of Bitcoin options crossed USD1 billion for the first time in December. The maximum daily trading volume of options in Q1/2020 by comparison was USD180 million.
“Bitcoin’s new high of crossing USD28,000 underscores the research and hard work invested into the ecosystem which enabled this current rally. The crypto industry’s growth is in good part attributable to a combination of factors, including wider public education and institutional interest, innovations in DeFi protocols and smart contracts, and development of a robust derivatives market. Binance will continue to play a leading role in creating useful products for the community,” says Changpeng Zhao (CZ), Founder and CEO of Binance.
Options are a class of derivatives contracts, widely used in traditional finance to hedge against asset price fluctuations for settlement at a predetermined expiration date in the future. Unlike futures contracts, options entitles the holder to the right without the obligation to exercise the contract.
European-style options can only be exercised by the option holder at the contract’s expiration date. Binance first launched American-style options in April 2020, which can be exercised at any time up till expiration. Users now have access to both styles of options to better manage their portfolio according to their trading strategies. The term “vanilla” refers to how the contract arrangement is generally simple, in contrast with more “exotic” products.