OKEx exchange announced the launch of bitcoin options trading for a selected group of clients before the scheduled public launch of January 9, 2020, confirming that these contracts will be settled in BTC daily.

OKEx crypto exchange officially announced the launch of Bitcoin options trading for a chosen few clients. This has happened ahead of a public launch on January 9, 2020. In a December 26 press release, the third-largest crypto exchange by daily trading volume worldwide has confirmed that the new contract will be settled daily in Bitcoin.

Increasing Hedging Strategies Options for OKEx Traders

An options contract is a popular derivative that lets traders hedge against asset price swings in all directions. It provides users with the opportunity to buy either a right to buy a call option or sell a put option of a particular asset at a constant ‘strike price’. The strike price is normally determined on or before the contract’s expiration date.

Official reports from OKEx reveal that its Bitcoin options contract will be entirely based on the Black-Scholes pricing model. This model is a valuation algorithm that has been the basis for the pricing model of options on the traditional assets that run since the early 1970s.

These contracts will use real-time data. It is allegedly being introduced as part of a refurbishment of the platform’s whole trading infrastructure. The introduction of options together with the existing margin trading, perpetual swaps, and futures markets will diversify the hedging and trading strategies available to OKEx users, the exchange claims.

The financial director of OKEx, Lennix Lai, said in a statement that options are a unique instrument. It lets traders manage prices and simultaneously hedge the volatility of the digital assets. That enables them to benefit from more than just market trend and direction. He added:

“We welcome clients from different segments, especially from our institutional clients, who have shown the fastest-growing demand in derivatives trading, especially on futures and perpetual swaps.”

Crypto exchanges expect heavy adoption of options

The Chicago Mercantile Exchange (CME) Group indicated that it hopes to see high demand in Asia for its imminent Bitcoin options product. The global head of equity index and alternative products at CME, Tim McCourt, notes that options are not like futures that give traders a ‘one-for-one exposure’. They have the benefit of providing upside exposure or downside protection at a fraction of the underlying price.

Last month, OKEx unveiled Bitcoin futures contracts that are integrated with the USDT stablecoin. It now plans to launch replicate contracts for several other crypto assets. These include Ether, Bitcoin Cash, EOS, Litecoin, Tron, and XRP.