One of the major players to emerge from the cryptocurrency industry last year was FTX. Launching in mid 2019 on the back of an incredibly successful quantitative trading firm Alameda Research they took the exchange industry by storm becoming one of the top 5 exchanges by volume in a matter of weeks.
One of major keys to success that allowed FTX to become so prominent so quickly was its heavy focus on innovation. Having new and unique trading products such as altcoin indices or leveraged tokens brought droves of traders to the platform. And this innovation looks like its going to continue with the launch of options contracts.
Options contracts are a somewhat complicated financial product and their complexity goes well beyond the scope of this article. In the most simplest of forms they allow someone to buy or sell a specific asset at a certain price within a certain time frame. Buying an options contract when you expect it to go up is a ‘Call’. This is opposed to a ‘Put’ which is a contract to sell an asset at a specific price. You can get a better understanding of options here.
Options trading is not new, already doing billions of dollars in volume on traditional financial markets. However their growth in cryptocurrency markets is. They were first popularly launched by Deribit in 2018. But remained relatively difficult for large players to use fully due to liquidity issues. However the final quarter of 2019 brought a lot more interest.
With this growth of interest more exchanges are launching options trading. OKex recently launched options on their platform. The giant that is CME Group also just launched options trading contracts based on futures. We wouldn’t be surprised to see other giants like BitMEX dip their toes in soon.
FTX Options Trading in its first day alone did 1700BTC in volume.
Options contracts aren’t particularly exciting in themselves. What is interesting though is what they represent. They represent the somewhat continued exponential growth of sophistication in cryptocurrency markets. Whether this increased sophistication is a good thing or a bad thing is for you to decide..