Binance, one of the top cryptocurrency exchanges in terms of trading volume, has rolled out Bitcoin (BTC) option trading facility on its platform offering futures trading.
The options trading facility went live today, but will be currently limited to the mobile app offered by the exchange.
Options contracts paves way for traders to acquire a call (legal right to buy an asset at the contracted or ‘strike’ price) or put option (legal right to sell an asset at the contracted or ‘strike’ price).
As Binance is offering the American version of the derivative, as against the European version, traders will be able to exercise their rights i.e. settle the deal at the pre-determined strike price at any moment earlier or on the date of expiry.
For the BTC/Tether (USDT) options contracts offered by Binance, traders have to initially move their USDT holdings to their futures wallet, from their spot wallet, and select an expiry date, varying from 10 minutes to one day.
In a message to traders, Binance has explained that the premium involved in the contract must be prepaid, implying that any net profits on transactions will be calculated by deducting the premium from the gross profit. The exchange warned that:
“There is no guarantee that your options purchase will execute at a profit after the premium has been deducted. Most options purchases will not be profitable, but a minority will be very profitable. Please use at your own discretion.”
Malta-powered cryptocurrency exchange OKEx has already rolled out Bitcoin options trading for a chosen group of traders last December, much before the public rollout in 2020.
Chicago Mercantile Exchange Group revealed their intention to roll out an options product for Bitcoin futures back in September 2019, later signaling that it was specifically expecting huge demand in Asia.
