Markets Ribbon Finance's Decentralized Exchange Aevo Unveils Altcoin Options Trading
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Loading... - Nerby Erik
- 15 May 2023
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Ribbon Finance, a structured product firm based on Ethereum, has launched a new offering for its decentralized exchange, Aevo. Users of Aevo can now trade options linked to various alternative cryptocurrencies (altcoins), which are digital assets that exclude Bitcoin (BTC) and Ether (ETH). This service was previously only available through over-the-counter trading, but with the new offering, users can choose the strike price and tenure of their options and receive immediate quotes from market makers Galaxy, GSR, and OrBit Markets.
Options are contracts that provide buyers with protection against bearish or bullish market movements. A call option grants the buyer the right to purchase an underlying asset at a predetermined price on or before a specific date, while a put option grants the right to sell. By introducing on-chain altcoin options, crypto traders who focus on small-market-cap tokens can now develop strategies, such as spot/futures and options combinations or spreads, which could enable them to take advantage of market scenarios or major events like Litecoin's halving.
Deribit currently dominates the crypto options market, which is primarily focused on Bitcoin, Ether, and Solana (SOL). However, Aevo's new offering brings additional choices for traders who prefer altcoins. At present, users of Aevo can only purchase options and hold them until expiry or square them off beforehand. In the future, Aevo intends to enable users to write options with custom margins and choose their counterparty, according to the company's official statement.
Julian Koh, the CEO of Ribbon Finance, explained to that market makers would have to provide collateral worth about 30% of the notional trade amount. OrBit Markets, a crypto market maker, claimed that Aevo's "portfolio margin" system would make it more capital-efficient for users. The portfolio margin system calculates the real-time margin requirements by offsetting money-making and losing positions in a given portfolio.
Aevo was launched by Ribbon Finance in 2020, allowing Ether investors to trade options on-chain. In 2021, the company's structured products yielded double digits, making them popular with retail traders looking for an alternative to the popular cash and carry arbitrage strategy.
