Understanding How Huobi Options Gives You More Options
As one of the largest Bitcoin futures exchanges, Huobi is known for its Bitcoin perpetual contracts, making them mainstream in the crypto industry.
Huobi said on the announcement of Options that they are very similar to the futures, but options buyers do not have any obligation to buy the asset upon maturity, instead they can exit by giving up the execution right.
Straight away this makes for an interesting position for Futures traders and adds an entirely different edge to how a trader views a futures contract as they have a backup if there is no profit to be made in the trade.
European Style of Option
Huobi adopts European-style options, which is a type of options contract that limits execution to its expiration date. When the option expires, the arithmetic average of the index prices of the last hour is quoted as the delivery price.
Huobi Futures has designed a low-par value with 0.001 BTC and a minimum price change in order book aggregated to 0.01 USDT.
Huobi Futures has adopted USDT-quoted options trading so users can trade without the fear of floating.
Options Type (Expiration)
The weekly, bi-weekly and quarterly options will be available at Huobi.
Weekly options will be delivered on imminent Friday; Bi-weekly options will be delivered on next Friday; Quarterly options will be delivered on the last Friday of imminent quarter.
Crypto Derivative Market
Cryptocurrencies have quickly become a popular trading asset as the volatility and digital nature makes them appealing to traditional and new traders alike. More so, the trading space has matured to be much more akin to a professional ecosystem.
The emergence of derivatives cryptocurrency trading has been embraced by those in the space, as well as a new breed of institutional and retail trader that have been attracted to the potential this new age asset has.
Cryptocurrency derivatives trading volumes climbed 32% in May of this year to a new record high of $602 billion, according to data analytics company Cryptocompare. To put this into perspective, total spot volumes grew at a slower pace, rising 5% to $1.27 trillion in May.
Derivatives trading have opened new doors on the trading of things like Bitcoin and other popular digital assets, but it has also opened an entirely new box of futures trading. One of the options now available to cryptocurrency traders is Huobi Options.
Options are a new option
Options is a trading opportunity that has been highly prized and well received by institutional buyers and traditional traders. This was evident by data from CME earlier in the year that showed the total open interest for CME Bitcoin options contracts jumped to $373 million in June compared to only $35 million in May — a ten-fold increase in merely 30 days.
This is a healthy sign for traders with Huobi as this increased interest from traditional traders who are entering the cryptocurrency space means that it is an optimum way to ensure higher potential profits with this new way to trade.
Huobi’s Futures offering, with its perpetual swaps contracts, as well as now newly launched Options contracts, means that there are many more opportunities for traders looking to enter a new way to trade that is sweeping the cryptocurrency space.
A Bitcoin Options contract is similar to a futures contract with the main difference being that the option buyer has an option, rather than an obligation, to buy or sell on a fixed date at an agreed upon price.
Bitcoin Options are popular derivatives trading contracts not least because they are more cost efficient. These contracts also offer a leverage function, but generally, the premium is much lower than the spot index, which means that, when compared with spot trading, users only need to pay the premium to have a position so as to gain the same possibility of losses/profits.
Options are also less risky as the maximum loss an Options buyer can incur is the Options Premium while there is near unlimited potential for profit. Hedging can also be effectively achieved on Options contracts against the spot market and be used in arbitrage.
Options can also be used in conjunction with other trading methods and strategies and because of their effectiveness in a rising, falling, or flat market; they can be effective in profit taking as long as the right goals are set.