There are many ways to trade cryptocurrency, from spot and margin trading, to derivatives such as options.
In this post we’ll look at five exchanges that enable investors to trade crypto options, as well as the features and fees involved.
Before we do so, let's look at what cryptocurrency options are.
Options are a type of derivative, which means they are based on an underlying asset, such as commodities, stocks or cryptocurrencies.
There are two basic types of options, these are ‘call’ and put’ options.
Call option holders have the opportunity to buy an asset at a fixed price within a certain time.
Put options have the opportunity to sell at a fixed price during a certain time window.
When buying Bitcoin options, investors pay a premium for the chance to buy or sell Bitcoin at a set price in the future.
This is basically another way to long or short Bitcoin, giving investors a chance to profit in a bear market and make even larger profits in a bull market.
Like regular options, Bitcoin options owners can exercise their option by the contract expiration date, after which the option position will be closed.
If a trader wants to exit their position early, they can sell their position at the current market price.
Below we’ll look at five different exchanges that offer crypto options trading.
Bit.com is a high-performance derivatives exchange. The platform offers a series of institutional and retail-friendly features, including portfolio margin, which rewards hedgers.
This is done by providing a more significant margin benefit to their well-maintained low-risk portfolios. The platform also enables block trading on all products through Paradigm and ACCX.
Bit.com has a Unified Margin (UM) system, an upgraded trading and risk management system launched by the exchange.
This is a system that other exchanges like Derebit does not offer, however OKX has this feature too.
This system offers a one-account solution for its users, allowing them to use all of the assets in their account as collateral to trade all products available on the platform.
In the Unified Margin mode, users trade through the unified margin account. This way you can trade spot, margin, perpetual, futures and options in the same account.
You don’t need to transfer funds back and forth between multiple accounts.
All collateral cryptocurrencies in the unified account are shared as USDT denominated margin to improve capital utilization, thus lowering the risk of being liquidated.
The profit and loss of multiple positions held by users will be combined and offset against each other, whilst using Unified Margin.
This way, a loss in a particular position will not necessarily trigger forced liquidation. Instead, liquidation will only occur once the overall account risk reaches a critical level.
Fees on Bit.com are split into seven tiers with Maker fees starting at 0.0200% and Taker fees starting at 0.0300%.
Deribit is an Amsterdam based, cryptocurrency exchange for Bitcoin futures and options trading.
Due to the low availability of crypto options, Deribit has become a popular options exchange for many crypto traders with large portfolios.
Deribit offers European-style Bitcoin and Ethereum options, which are options that can only be exercised at the time of expiration, not before.
Options are settled in cash instead of the underlying asset. Deribit also offers a range of BTC and ETH futures, including perpetuals and fixed expiry variants.
Like most exchanges, Deribit uses a maker-taker model for its fees, with reduced fees for market makers. Deribit charges 0.04% of the underlying asset value per contract for Bitcoin and Ethereum options.
Deribit also charges an additional 0.02% delivery fee, this is charged when the option is settled.
FTX is a Hong Kong-based derivatives exchange founded in 2019 and launched by market maker Alameda Research.
While competitors like Deribit list only a few options that are traded with a traditional orderbook, FTX offers endless strike prices and expiration times through its “Request For Quote” system.
This means that FTX doesn’t have to list hundreds (or thousands) of different order books, traders can simply fill out a form with the option they are interested in, and request it from FTX directly.
FTX offers trading in only European-style Bitcoin options, which cannot be exercised early. All options are cash-settled in USD on the expiration date.
The derivatives segment offers traders over 250 perpetual and quarterly futures, leveraged tokens, BTC options, and MOVE contracts with a leverage limit of up to 101x.
Trading fees on FTX are split into six levels, starting from 0.020 - 0.000% as maker fees and 0.070 - 0.040% as taker fees.
OKX (formerly OKEx) is a Malta based crypto exchange which offers a wide variety of trading services, from spot and margin trading, to futures, perpetual swaps and buying or selling crypto.
OKX offers a Unified Account, also known as Portfolio Margin. This offering means that traders can execute any spot, margin, futures, perpetual swaps and options trades from one place.
They also retain access to their entire portfolio, trading tools, risk management settings and more, whilst doing so.
Their Unified Account has three different account modes to match the requirements of retail and institutional investors, regardless of their experience levels.
Trading fees on OKX are 0.1% for Market Makers and 0.15% for Market Takers.
Binance is a leading global crypto trading platform that offers trading in a wide range of crypto assets.
The platform also has some of the highest liquidity for all assets in both the spot and the derivatives marketplace.
On Binance, traders can trade crypto options through the Binance Futures platform that was launched in 2020. You can trade with a leverage of up to 125x on cryptocurrency futures and options contracts.
Binance allows the buying and selling of European-style Bitcoin options, which can only be exercised on the contract expiration date. The option contracts are priced and settled in USDT.
Options trading fees are split into two parts, the transaction fee and the fee to exercise:
Transaction fee: Index price x Transaction fee rate, i.e., 0.03% of the underlying asset value
Exercise fee: Exercise price x Fee to exercise rate, i.e., 0.015% of the underlying asset value
The fee will not exceed 10% of the transaction fee and with the exercise fee, the fee amount will not exceed 10% of the profit earned by exercising the option.
As more institutional investors come into the crypto space, exchanges offering derivatives trading will be crucial for the continued growth of the crypto market.