Crypto Options Exchange Deribit to Offer Bitcoin Volatility Futures

Deribit, the world's largest crypto options exchange by volume, will soon launch bitcoin BTC$92,089.00 volatility futures, offering digital asset investors a simpler way than options to hedge against market volatility.

Futures tied 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 Wednesday.

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

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

Crypto traders have been using options strategies like straddle and strangle to express their views on volatility. However, these strategies are complex and require buying and selling options at various strike prices and high risk tolerance.

With the new offering, traders can bypass complexities involved in setting up options strategies and directly buy and sell volatility similar to trading futures tied to bitcoin's price. The product may attract more institutional and retail investor participation, 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 for volatility in the S&P 500 over the coming 30 days.

"DVOL futures are an exciting new product that will allow traders to hedge their positions & general risk management, take advantage of market volatility, but also the 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 get to trade only one-month expiry futures with the exchange planning to expand the offering to five expiries later.

The volatility futures will be linear and priced, margined and settled in Circle's U.S. dollar-pegged stablecoin USDC. Linear contracts offer a payoff that is related linearly 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.