Deribit, the world’s biggest crypto options exchange by volumes, will soon debut bitcoin (BTC) volatility futures, allowing digital asset investors an easier approach than options to hedge against market volatility.
According to the exchange’s chief commercial officer Luuk Strijers, futures linked to Deribit’s forward-looking bitcoin volatility index (DVOL) will be offered on Deribit beginning at the end of March under the symbol BTCDVOL. DVOL, introduced in early 2021, gauges the implied 30-day volatility of bitcoin as determined by Deribit’s options order book. The options market’s expectation for price volatility over a certain time period is known as implied volatility.
Instead of speculating on the course of future price movements, volatility trading includes placing a wager on an asset’s future stability. To gamble on volatility is to anticipate significant changes in either direction for the asset.
case day Unfortunately, these tactics need high-risk tolerance, the ability to purchase and sell options at different strike prices, and are complicated.
With the new product, traders may immediately purchase and sell volatility, much like they would when trading bitcoin-price-linked futures, avoiding the complexity of putting up options strategies. Similar to the Chicago Board Options Exchange’s (Cboe) VIX futures, which are derivatives on The Cboe Volatility Index, or VIX, the product may draw increased involvement from institutional and individual investors. The index reflects the market’s forecast for S&P 500 volatility over the next 30 days.
DVOL futures are an interesting new product, according to Strijers, that will enable traders to hedge their positions, manage overall risk, profit from market volatility, as well as generate alpha and diversify their portfolios. “Those who want exposure to Bitcoin volatility but do not want to trade sophisticated options techniques” may find this product to be very helpful.
Deribit customers will initially only be able to trade futures with a one-month expiration date, but the exchange plans to eventually extend the offering to include five expirations.
The goods will be linear futures that will be priced, margined, and settled in Circle’s USDC stablecoin, which is tied to the US dollar. The payout offered by linear contracts is linearly correlated with the spot price of the underlying asset.
The fact that DVOL futures are leveraged instruments that may increase both profits and losses should be noted by traders.