Deribit’s New Election Expiry Options
Leading cryptocurrency options exchange Deribit has announced the launch of new options that allow traders to manage their bitcoin (BTC) and ether (ETH) positions in light of the upcoming U.S. presidential election on November 4. These new election expiry options have received positive feedback from traders, who see them as valuable tools for managing risk and capital amid anticipated market volatility.
The Role of U.S. Elections in Crypto Markets
The U.S. presidential election is considered a significant event for risk assets, including cryptocurrencies, due to its potential impact on fiscal policy and financial stability. Jeff Anderson, a senior trader at STS Digital, explained that options are essential for hedging uncertainty associated with such events, making Deribit’s decision to offer this tenor a natural step.
“The U.S. election is a focal point for risk assets [including crypto] and will have a binary effect on fiscal policy and financial stability. Options are an important tool for hedging this uncertainty, so it’s natural for Deribit to list this tenor,” Anderson said.
Early Introduction of 8 November US ELECTION Expiry 🇺🇸
Based on client demand, we have decided to introduce the 8 November 2024 options expiry ahead of the regular introduction timing.
The early introduction is aimed at enabling our clients to position themselves effectively… pic.twitter.com/FAkCkROUwr
ADVERTISING— Deribit (@DeribitExchange) July 16, 2024
Implications for Bitcoin and Ether
The upcoming election holds particular importance for cryptocurrencies, as Republican candidate Donald Trump has shown support for digital assets, distinguishing himself from incumbent Joe Biden. Although Trump has not outlined specific proposals for crypto regulation, his engagement with bitcoin miners and planned appearance at a Nashville conference have garnered industry support, positioning BTC and the broader market as potential beneficiaries of his presidency.
As a result, BTC and ETH could experience increased price volatility leading up to and following the election. This scenario necessitates a greater focus on using derivatives like options to hedge portfolios. Options provide insurance against both upward and downward price movements in the underlying asset. A call option offers protection against upside volatility, while a put option safeguards against price declines.
Details of Deribit’s Election Expiry Options
Deribit’s election expiry options will be available starting July 18 at 8:00 UTC and will expire on November 8, three days after the election results are announced on November 5. Each option contract on Deribit represents one BTC or ETH.
Laurent Kssis, a crypto ETF specialist at CEC Capital, praised Deribit’s initiative: “These options are a smart move from Deribit; they will allow traders to position themselves ahead, during and after the elections with a three-day buffer after the result. It’s a great way to get leverage and a hedge on your exposure simultaneously.”
Traditional Market Practices
Traditional market traders often use options to manage exposure during binary events like elections or corporate earnings, where outcomes are uncertain. According to an explainer from global derivatives giant CME titled “using equity options in an election year,” traders often employ strategies such as buying a straddle. This involves purchasing the same strike price put and call with an expiration date after the event, allowing traders to profit if the asset moves significantly from the strike price.
“We often see these types of trades placed before a major macroeconomic release or a company earnings report. If the underlying asset moves further from the strike price than the cost of the options, the trade would be profitable,” the CME explainer noted.
FAQ
Q: What are Deribit’s new election expiry options?
A: Deribit has launched options that allow traders to manage their bitcoin and ether positions in the context of the upcoming U.S. presidential election, helping to hedge against anticipated market volatility.
Q: Why are the U.S. elections significant for the cryptocurrency market?
A: The elections are crucial due to their potential impact on fiscal policy and financial stability, with Republican candidate Donald Trump’s pro-crypto stance drawing attention from the industry.
Q: How do these options help traders?
A: The options provide tools for managing risk by offering protection against price volatility, allowing traders to hedge their portfolios during uncertain times.
Q: When will Deribit’s election expiry options be available?
A: The options will go live on July 18 at 8:00 UTC and will expire on November 8, three days after the election results.
Q: What strategies do traditional market traders use for binary events?
A: Traders often use strategies like buying a straddle, which involves purchasing both put and call options with the same strike price and expiration date after the event, to profit from significant price movements.
