Deribit, the world's biggest crypto options exchange by volume, will soon launch erratic Bitcoin futures.
Deribit will have access to futures contracts connected to the Deribit Bitcoin Volatility Index (DVOL) futures by the end of March under the ticker BTCDVOL, base to the exchange's chief commercial officer Luuk Strijers.
The measure's objective is to provide investors in digital assets with simpler protection options against market volatility. Strijer said:
"DVOL futures is an exciting new product that will allow traders to manage overall risk, take advantage of market volatility, and generate alpha and multivariable This product is especially useful for those who want exposure to BTC volatility but don't want to trade complex options strategies."
Volatility trading involves betting on an asset's continuous stability in the future rather than concentrating on the direction of price movement in the future. To bet on volatility, one must believe that the asset will move significantly in either direction.
To express their views on volatility, bitcoin traders have employed options trading strategies like the straddle and strangle. These complex, high-risk strategies involve buying and selling options with different strike prices.
Beginning in early 2021, DVOL will monitor Bitcoin's 30-day implied volatility as calculated from Deribit's options order book.
Under the new agreement, traders can buy and sell volatility tied to the price of Bitcoin that is akin to futures right away without having to deal with the difficulty of setting up options strategies.
This product might attract more individual and institutional investors than the VIX futures on the Chicago Options Exchange (Cboe) Volatility Index, or VIX. This indicator shows what the market expects the volatility of the S&P 500 to be over the next 30 day.
The items will be linear futures contracts that will be valued, margined, and settled in Circle's USDC stablecoin. With linear contracts, the return is linearly tied to the underlying asset's spot price.
Deribit users will only be able to trade futures contracts with one-month expirations at first, but the exchange intends to expand the offer to include contracts with five-day expirations later on.