Binance, a successful cryptocurrency exchange firm, today announced the launch of Vanilla Bitcoin Options “European-style” contracts. Options are priced and settled in USDT and give consumers more flexibility in diversifying their portfolio and controlling their exposure to the market. Users can buy hedging and selling options as well as write and sell options as an issuer.
The launch follows the completion of a testnet trial in November 2020 that gathered public feedback to further improve the user experience of traders, such as optimisation of margins and risk management mechanisms. Users will enjoy a stable and liquid trading platform that Binance has become popular for. Institutional and specialised users needing a large variety of products will profit from efficient liquidity and collateral management with a simple single-wallet solution through Binance’s many products.
With increased institutional demand and advances in cryptocurrency infrastructure, there is an increasingly growing need for quality hedge and liquidity items. Market data shows the regular trading value of Bitcoin options reached $1 billion for the first time in December. The maximum daily trading value of options for Q1/2020 was, by contrast, $180 million.
“Bitcoin’s new high of crossing $28,000 underscores the research and hard work invested into the ecosystem which enabled this current rally. The crypto industry’s growth is in good part attributable to a combination of factors, including wider public education and institutional interest, innovations in DeFi protocols and smart contracts, and development of a robust derivatives market. Binance will continue to play a leading role in creating useful products for the community.”
– Changpeng Zhao (CZ), Founder and CEO of Binance
Options are a class of derivatives contracts that are commonly used in conventional finance to cover against asset price volatility for settlement at a fixed expiration date in the future. Unlike futures contracts, options grant the investor the freedom to execute the contract without the obligation to do so.
European-style options can only be exercised by the holder of the option at the expiry date of the contract. Binance first released American-style options in April 2020, which can be introduced at any time up to the expiration date. Users now have access to all types of options to help control their portfolios in accordance with their trading strategies. The term “vanilla” refers to how the contract arrangement is generally simple, in contrast with more “exotic” products.
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