The world of cryptocurrency options trading is evolving as Ribbon Finance announced that its decentralized exchange Aevo has started offering options tied to alternative cryptocurrencies (altcoins), which are digital assets other than BTC and sometimes ETH. This move creates new opportunities for traders who wish to set strategies and take advantage of market scenarios for tokens with smaller market caps. Users can now execute complex trading tactics such as spreads or combinations of spot, futures, and options trades.
With Aevo’s new offerings, traders can pick the options strike price and tenure of these options, and obtain instant quotes from crypto market makers like Galaxy, GSR, and OrBit Markets. Previously, these altcoin options could only be traded through over-the-counter desks – a less accessible and less transparent trading method.
Options are derivative contracts that provide the purchaser protection from bullish or bearish market moves. A call option grants the right to buy the underlying asset at a predetermined price on or before a specific date, while a put option gives the right to sell. Market makers are required to post collateral in the form of the dollar-pegged stablecoin USDC, typically equaling about 30% of the notional trade size.
A significant innovation brought by Aevo is the implementation of a “portfolio margin” system, which enhances capital efficiency for on-chain option trading. This system accounts for both profitable and losing positions when calculating real-time margin requirements, enabling greater financial flexibility for traders.
However, the options market still remains dominated by Deribit, which concentrates mainly on BTC, ETH, and Solana (SOL). As of now, Aevo users can only buy options and hold them till expiry or square off before the deadline. But the platform plans to enable users to write options with customized margins and counterparties in the near future.
In conclusion, the introduction of on-chain altcoin options presents a valuable opportunity for crypto traders focusing on smaller market cap tokens. It allows for more advanced trading strategies and improved capital efficiency, which could significantly impact the growth trajectory of the altcoin market. However, the crypto options market remains in the hands of a few giants, and it will be interesting to see how Aevo’s developments impact the market’s competitive landscape.
Source: Coindesk
