Bitcoin Volatility-Tracking Options See 25% Monthly Volume Increase

Published at: April 16, 2020

Move, an options contract which tracks Bitcoin’s (BTC) daily volatility, recently saw a 25% 30-day trading volume increase on the crypto derivatives platform, Delta Exchange.

According to an announcement which Delta Exchange sent to Cointelegraph on April 16, Move contracts worth $8 million were traded on the platform over the past 30 days. The platform also observed an additional $1 million worth of Ether (ETH) volatility tracking contracts traded during the same time period. The exchange’s CEO Pankaj Balani said:

“Whilst the first 2 weeks of March saw just over 1Mn worth of BTC MOVE contracts traded, this number was close to 2.5 Mn for the last 2 weeks. Since then, though the volatility has cooled off, volumes in the MOVE contracts are still high and over 4Mn worth of MOVE contracts have already been traded for the month of April. We are seeing the similar trends on ETH MOVE product too.”

High volatility environments push for higher volumes

According to Delta Exchange, this represents a 25% increase in trading volume for the contracts. Balani explained why he believes traders are showing increased interest in the options:

“Traders are taking advantage of the high volatility environment and selling options. We saw strong selling in these products post Black Thursday as volatility spiked to as high as 250%. [...] We are in a high volatility environment.”

The CEO pointed out that Bitcoin’s volatility was about 40%-50% before the recent crash. After the crash concluded, the volatility increased five fold. He concluded that now that the volatility decreased again, the contracts have once again become buyer dominated.

Balani said that there are always two Move contracts for Bitcoin and two for Ether. One tracks the current and next day’s volatility, and the second starts trading when the current contract expires. Traders are allowed to set limit orders for the next day’s contract before matching starts. He said:

“Having contracts listed ahead of time gives traders an opportunity to roll their positions from the current day to the next day right when the contract is launched.”

Balani elaborated that the contract is just a call and a put option bundled together. The contract is meant to make options trading easier for retail traders, he continued:

“Trading a MOVE contract is like trading a futures contract on the absolute movement in price of BTC or ETH. Traders are rather familiar with how futures trading works and hence find trading MOVE contracts much simpler than trading individual options.”

Bitcoin options on the rise

As Cointelegraph explained in a dedicated article, an option is a type of tradable derivative contract that allows the owner to buy or sell at a specified price by the expiration date. Contracts of this kind provide exposure factors including moneyness (the asset’s current price vs. the strike price), time to expiry, and implied volatility.

Recently, Binance officially launched Bitcoin Options on its futures platform, though these are only available via its mobile app for now.

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Bitcoin
Trading
Ethereum
Altcoin
Cryptocurrency Exchange
Cryptocurrencies
Derivatives
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