Thursday January 28, 2021
Bitcoin (BTC) $30,291.00   Ether (ETH) $1,244.40
  • Events
  • News
    • Blockchain Technology
    • Capital Raising
    • Crypto Exchanges
    • Crypto Payments
    • Gaming & Betting
    • Networks & Protocols
    • Security
    • Vendor Technology
    • Wallets
NEWSLETTER SIGNUP
EXCHANGE 300+ COINS
CryptoNinjas
  • Crypto & Blockchain Links
  • Real-Time Market Data
  • Bitcoin ATM Map
  • Token Offerings/Listings
No Result
View All Result
CryptoNinjas
No Result
View All Result
Home Crypto Exchanges

BitMEX to launch its first cryptocurrency options product

Published by CryptoNinjas.net
04/30/2018

Cryptocurrency derivatives exchange BitMEX today announced a new options product called UPs and DOWNs. This marks a significant milestone in the product development history of the BitMEX platform says CEO Arthur Hayes.

The exchange already features futures, swaps, and now adds options. CEO Hayes said, “BitMEX is inching closer to the goal of offering all manner of derivative products for the crypto-coin industry.”

UPs or Upside Profit Contracts, and DOWNs or Downside Profit Contracts are similar to call and put options.

As for launching this product now, BitMEX stated that the liquidity profile of bitcoin derivatives trading has changed dramatically over the past 12 months. The BitMEX XBTUSD Perpetual Swap is now the most heavily traded instrument in the entire crypto trading industry. Average daily trading volumes are in the billions of USD notional.

BitMEX CEO Arthur Hayes added:

“Before non-linear products like options are viable, linear products (Perpetual Swaps and Futures) must be sufficiently liquid. Given the liquidity profile of XBTUSD and the quarterly Bitcoin / USD futures contracts, we now believe there is sufficient liquidity in order to launch a successful options product.”

Use Case

Imagine Bitcoin is currently trading at $10,000 and a trader believes that by the end of the week, it will move 10% higher to $11,000. However, they don’t want any exposure to the price unless it hits the target. Also, they do not want their position to be liquidated before the target is reached, regardless of the intra-week spot movements. For example, if the price drops to $5,000 but recovers to $12,000 by the settlement date, the trader will still profit and will not be liquidated.

Hence, traders want the ability to participate above their target of $11,000 on the long side. The UPs product allows you to express this view, however, this “optionality” comes at a cost which is the premium that must be paid to the seller of the option.

Why Can You Only Buy?

Selling naked (i.e. unhedged) options is one of the fastest and easiest ways to financial ruin given the potential for unlimited losses. On BitMEX, traders are limited to the margin they deposit on the platform, hence if the seller of the option cannot make good on potential losses, then socialized loss systems will need to be put in place which we want to avoid. As a result, we require sellers of the options to post the full notional value of the UP or DOWN contract.

Because no leverage is offered to sellers, it is very expensive from a capital perspective to make a market. In order to guarantee tight spreads at sufficient size, the BitMEX affiliated anchor market maker will be the only entity allowed to sell options initially.

Many users of BitMEX voices concerns that a BitMEX affiliated entity is the sole market maker, the BitMEX team left some points to consider:

“Until our engine performance is fixed, we refrain from listing any new product that exacerbates the issue. (E.g. this is one of the reasons why we delisted a number of our quarterly altcoin futures contracts since the volumes they generated did not justify the engine resources consumed.) Hence, if only one market maker quotes on the UPs and DOWNs product, then the impact will not be meaningful on the engine.”

  • Furthermore, this means that the anchor market maker cannot manipulate the UP or DOWN market in any way to liquidate any customer.
  • The anchor market maker is tasked with keeping a tight market so that buyers can enter and exit trades as they wish throughout the contract’s length. We want to increase liquidity, having wide markets or an empty order book is not in BitMEX’s interest.

The UPs and DOWNs products need to be fully margined. That is, buyers must pay the premium in full and sellers must post the full notional of the option in the margin. That means that regardless of where the price settles, neither buyers nor sellers will ever be liquidated. If the contract settles in the money, buyers are assured they will always receive their profit.

6
SHARES
FacebookTwitterLinkedinRedditE-MailTelegram

Related Posts

Crypto derivatives exchange BitMEX fully verifies user base

Crypto derivatives exchange BitMEX fully verifies user base

01/07/2021
BitMEX to launch new XRPUSD swap and delist UP & DOWN contracts

BitMEX to launch new XRPUSD swap; delists UP & DOWN contracts

01/23/2020
BitMEX

BitMEX parent company hires General Counsel

09/10/2019
Edge crypto wallet

Bitmex Ventures and Fenbushi Capital lead funding round in Edge crypto wallet

08/15/2019
CryptoCompare and BitMEX partner on cryptocurrency futures data

CryptoCompare and BitMEX partner on cryptocurrency futures data

06/10/2019
BitMEX invests in and partners with Philippine Digital Asset Exchange (PDAX)

BitMEX invests in and partners with Philippine Digital Asset Exchange (PDAX)

06/03/2019
Load More
Leave Comment

Recent Updates

Multi-chain oracle platform Paralink Network raises $2.8 million

Moonbeam completes test integration of ChainBridge, the network’s first bridge to Ethereum

Crypto asset manager app ICONOMI adds support for automated trading

Wallet app for CommerceBlock’s Bitcoin sidechain now operational

Japan crypto exchange bitbank adds support for QTUM

Where to Exchange

Bit2MeLeading Spanish Bitcoin ExchangeVisit
BL3P
European Bitcoin ExchangeVisit
ChangellyExchange & Buy 150+ CryptocurrenciesVisit
itBitAmerica's First Regulated Bitcoin ExchangeVisit

Trending Views

Crypto exchange Bitpanda opens pre-orders for Visa debit card

Moonbeam and Ocean Protocol to bring a new data economy to Polkadot

Crypto API platform Zabo now supports FTX

BetProtocol rebrands to BEPRO Network offering full blockchain gaming codebase

NEM Ventures launches 2021 NEM Ignite incubator program

  • Home
  • Directory
  • Data
  • About
  • Contact
SUBSCRIBE

© 2021 CryptoNinjas Disclosures | Privacy Policy

  • Home
  • Crypto Links
  • Market Data
  • Blockchain Tech
  • Exchanges
  • Capital Raising
  • Vendor Technology
  • Token Offerings/Listings
  • Payments
  • Wallets
  • Bitcoin ATM Map
  • Conferences & Events
  • About
  • Contact

© 2021 CryptoNinjas Disclosures | Privacy Policy


Go to mobile version