Deribit has added to its derivatives offering with the introduction of USDC-settled options trading for Avalanche and Tron.
According to Deribit, the new contracts are accessible to users from eligible jurisdictions and are settled 100% in USDC, ensuring that the two options and the perpetual products are aligned with the same settlement currency.
Options contracts allow the buyer, but do not obligate the buyer, to buy or sell the underlying instrument at a given price before the contract expires. The new AVAX and TRX contracts on Deribit are cash-settled, meaning they do not require the physical delivery of tokens upon expiration.
They are available in two variants: a call option and a put option. A call option gives the buyer the right to buy the underlying asset at the strike price, whereas a put option gives the buyer the right to sell the underlying asset at the strike price. AVAX options have a value of 100 AVAX, and TRX options have a value of 10,000 TRX per contract. These contract sizes determine the notional exposure of an individual option and are among the primary considerations that traders should make when assessing position size and risk.
Deribit noted that deposits of AVAX or TRX tokens are not yet accepted as offset currencies, unlike some of its current options markets, such as those for SOL and XRP. Consequently, traders can no longer offset margin requirements when they take these options with AVAX or TRX balances, and all settlements are based on USDC.
Use cases: hedging and yield strategies
With the addition of AVAX and TRX options, a range of existing derivatives strategies already implemented in other crypto options markets is feasible. Hedging spot exposures is one of them. An example is a trader who has a position in TRX can purchase a put option to establish downside exposure and retain upside exposure.
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AVAX and TRX linear options are now live on Deribit. 🚀USDC settled. Built for traders who want more altcoin optionality.
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When the market price is lower than the strike price of the put option on the day of expiration, the put option rewards the losses on the spot position. Since Deribit options are cash settled, this protection is secured by a USDC payout rather than with a token transfer.
The other application is to generate premium income via a covered call. In this plan, the trader holding AVAX call options sells his/her current positions in the spot markets. These two strategies are founded on a predetermined risk profile of options contracts. The maximum or set loss is a fixed amount that option buyers can lose, compared to the option sellers who gain premium income at the expense of bearing some obligations at the market.
