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Binance users have a new option when it comes to futures trading on their favorite exchange. Or rather options, because the platform has just expanded its BTC and other crypto options, enabling retail users to access the futures contracts that are popular with pro and institutional traders.
Binance’s decision to expand its crypto options is a reflection of both the product’s success and of the broader market interest in gaining exposure to futures contracts of all kinds. Retail users can now access options contracts for blue chip assets such as BTC, ETH, BNB, and SOL, providing a flexible trading tool for users who want to enter a long or short position over a longer timeframe than is feasible with perps.
The People Want Options
It’s fair to say that Binance’s options products have been a phenomenal success, accounting for a growing tranche of the exchange’s total futures volume. Over the last five years, total industry volume for options has grown by 3200% and is now approaching $140B a month. One of the reasons why options have proven popular with institutional traders is because these contracts carry much lower fees than perpetual futures, allowing positions to be kept open without fees becoming prohibitive.
Professional investors like the ability to use options as a hedge against other positions they have open, such as to help maintain a delta neutral strategy. This ensures they are relatively unaffected by positive or negative market movements, allowing such traders to focus on areas where they excel such as arbitrage.
Known as a Call or Put respectively, options give the buyer the right to buy or sell an asset at the strike price – that is, the price it is at when the contract ends, typically at the end of a calendar month or quarter. Binance offers European-style options, which can only be exercised at expiration. This differs from the American-style model, where options can be exercised any time before this date.
Mo’ Flexibility, Mo’ Futures
As futures have become the preferred trading type for millions of retail users ahead of spot markets, CEX and DEX futures volumes have soared – but in the case of retail, this has largely consisted of perps. Binance’s decision to roll out options tools to all users, however, is suggestive of growing sophistication among retail users. Those who’ve mastered perps are hungrier for more, and in options contracts they’ll find plenty to get their teeth into.
For an exchange such as Binance, the desire to give users greater tools with which to trade must be balanced with the need to implement robust risk management tools and ongoing educational resources. While Binance Academy takes care of the latter, the risk reduction component takes a number of forms. This includes compelling users to post sufficient margin to cover collateral requirements. This ensures that the exchange remains fully solvent at all times and that users do not open into a contract to buy assets that they are not in a position to fulfill.
Binance has also just strengthened its Options Enhanced Program for high-volume and institutional traders. The improved program offers more attractive maker and taker fees coupled with lower qualification thresholds. These efforts should reinforce Binance’s status as the preeminent exchange for options trading.
Image by Satheesh Sankaran from Pixabay
