Cryptocurrency exchange OKEx announced the launch of Ether (ETH) options contracts on its trading platform yesterday.
After launching, OKEx announced that it had placed 1,000 ETH in an ETH Options insurance fund to prevent clawback.
According to the OKEx announcement, options are designed to allow traders to buy or sell the underlying asset to hedge risk and maximize profits, while offering users a low-cost way to hedge the risk from spot trading.
ETH Options Settled in ETH
Speaking of the launch, OKEx CEO, Jay Hao said, ‘OKEx ETH Options Contracts will be settled in ETH. Each contract’s face value of ETH/USD options is 1 ETH.’
OKEx, which is the top Bitcoin (BTC) futures exchange, claims that financial derivatives ‘play an irreplaceable role in hedging risks and maximizing profit.’
‘For example, when the price of ETH goes down, spot traders can only choose to hold or close their positions to cut losses. With ETH options, traders can choose to buy put options and profit from falling prices to offset losses in the spot market while holding ETH for possible future gains.’
It’s understood the mark prices will be determined by OKEx, using a ‘black model on a real-time basis.’ With the final payout being served by ‘a time-weighted average of the underlying price over a certain period of time before the option expires.’
Ethereum Building Links With Legacy Markets
This is further bullish news for the Ethereum eco-system, as investor and trader interest in the crypto derivatives market has begun to intensify.
With open interest in Ether futures listed on major exchanges rising by 100%, and open interest in Ether options listed on Deribit rocketing by over 900%, it’s emphasizing the maturity and interest of Ethereum as an asset.
And with the Grayscale Ethereum Investment Trust recently announcing investment growth in their ETHE trust of over $11.7m to $276.5m in the 12 months since launch, it seems like the big money is really starting to take note.
It seems like it’s one big news story after another with Ethereum of late. Many crypto aficionados will cringe at the thought of ETH derivatives, but the truth is, they’re inevitable, and can’t be stopped.
It’s the sign of a maturing asset, and with derivatives playing such an integral part in the legacy financial system, it seems like Ethereum is beginning to find its feet.
And as it attracts more derivative markets, it will naturally attract more institutions and professional traders.
Author: Tommy Limpitlaw