Crypto Options Exchange Deribit To Offer Bitcoin Volatility Futures

Deribit, the world’s largest crypto options exchange by volume, will soon launch bitcoin (BTC) volatility futures, offering digital asset investors a simpler way than alternatives to hedge against market volatility.

Futures linked to Deribit’s forward-looking bitcoin volatility index (DVOL) will be available to Deribit under the ticker BTCDVOL from the end of March, the exchange’s Chief Commercial Officer Luuk Strijers told CoinDesk on Thursday.

Launched in early 2021, DVOL measures bitcoin’s 30-day implied volatility calculated using Deribit’s options order book. Implied volatility refers to the options market’s expectation of price turbulence over a specific period.

Volatility trading involves betting on the future stability of an asset rather than taking a view on the direction of future price movements. Going long or buying volatility means betting the asset will see big moves in either direction.

Crypto traders have used option strategies such as straddle and strangle to express their views on volatility. However, these strategies are complex and require buying and selling options at different strike prices and high risk tolerance.

With the new offering, traders can bypass the complexities involved in setting up options strategies and directly buy and sell volatility similar to trading futures linked to bitcoin’s price. The product may attract more institutional and retail investors, much like the Chicago Board Options Exchange’s (Cboe) VIX futures – derivatives on The Cboe Volatility Index, or VIX. The index represents the market’s expectation of volatility in the S&P 500 over the next 30 days.

“DVOL futures is an exciting new product that will allow traders to hedge their positions and overall risk management, benefit from market volatility, but also alpha generation and portfolio diversification,” Strijers said. “This product is particularly useful for those who want exposure to BTC volatility but do not want to trade complex options strategies.”

Deribit users will initially only be able to trade one-month expiration futures with the exchange, which plans to expand the offer to five expirations later.

The products will be linear futures, priced, margined and settled in Circle’s US dollar pegged stablecoin USDC. Linear contracts provide a payout that is linearly related to the spot price of the underlying asset.

Traders should note that DVOL futures, like other derivatives, are leveraged products that can amplify both gains and losses.