Binance Rolls Out ETH & XRP Option Contracts; A Month After Launching its BTC Options Trading
Binance has added ETH and XRP option contracts to its trading ecosystem.
This brings the total number of options to three, having spearheaded with Bitcoin contracts about a month ago. The exchange announced on May 25 that its users should, therefore, upgrade their applications in order to enjoy the new listings.
In an earlier blog post, Binance CEO Changpeng Zhao, had highlighted that options are indeed a crypto market niche as the industry adopts more sophisticated products:
“Options contract is a much-anticipated product, allowing the traders and miners to effectively buy insurance on their positions and for speculators to take advantage of the market movements as well.”
Binance XRP & ETH Option Contracts
This new class of assets allows crypto traders to purchase a contract, which gives them an option to execute at maturity but not the obligation. Ideally, Binance ETH and XRP contracts will enable users to lock in a future projected price at which they plan to execute if it's better than the prevailing market price.
However, they are not obligated to carry out the trade should the market price not favor their position. Instead, they lose the money/premium used to purchase the ETH and XRP option contracts; pretty similar to the already running BTC options model. The blog reads,
“Profit will be anything from 0 to infinity, and a premium is a fixed value paid at the start. Thus options have a fixed downside cost paid upfront with an unlimited upside. Net profit for your options trade is profit – premium.”
Notably, the blog was also keen to highlight the risks involved in crypto options trading. It points out that most traders are in fact not profitable:
“There is no guarantee that your options purchase will execute at a profit after the premium has been deducted. Most options purchases will not be profitable, but a minority will be very profitable. Please use at your own discretion.”
Binance Recent Expansion
Binance started off as a spot crypto exchange but has largely expanded its footprint since its launch. Today, it is competing with the likes of BitMEX in crypto derivatives volumes, an area where BitMEX held the fort for a long time.
The exchange also recently obtained approval for its China domain – binance.cn. This initiative aims to scale its presence in the Chinese market amidst the CBDC craze. CZ of Binance, however, noted that the initial focus will be on education as opposed to crypto exchange services.