Ethereum-based Ribbon Finance’s DEX Aevo launches altcoin options trading
Ethereum-based structured products firm Ribbon Finance’s decentralized exchange Aevo began offering options linked to alternative cryptocurrencies (altcoins), a crypto term used to describe digital assets other than bitcoin (BTC) and sometimes even ether (ETH).
Aevo users can trade options related to Lido’s LDO, Pepecoin (PEPE), Suis SUI, Arbitrum’s ARB, Litecoin (LTC), Aptos (APT) and other tokens that were previously only tradable through an over-the-counter desk, Ribbon Finance said in a press release shared with CoinDesk.
Users can select the strike price and expiration time of these options and get instant quotes from crypto market makers Galaxy, GSR and OrBit Markets.
Options are derivative contracts that give the buyer protection against bullish or bearish moves. A call option gives the right to buy the underlying asset at a predetermined price on or before a specific date, while a put option gives the right to sell.
The availability of onchain altcoins options means that crypto traders who focus on tokens with small market caps can now set strategies, such as spreads or spot/futures and options combinations. With these strategies, they can potentially take advantage of market scenarios or major fundamental events such as the Litecoin halving.
So far, the crypto options market is dominated by Deribit and generally limited to bitcoin, ether and solana (SOL).
Currently, Aevo users can only buy options and hold the same until expiration or sell before expiration. Down the road, Aevo plans to allow users to write options with custom margins and counterparty selection, according to the official statement.
Market makers will have to post collateral, roughly 30% of the nominal trade size, in the form of the dollar-pegged stablecoin USDC, Ribbon Finance CEO Julian Koh explained to CoinDesk.
Crypto market maker OrBit Markets said Aevo’s “portfolio margin” system makes it more capital efficient for users. The portfolio margin system balances money-making and losing positions in a given portfolio to calculate real-time margin requirements.
“A major breakthrough for Aevo was the activation of the portfolio margin, which greatly improves the capital efficiency of on-chain trading,” OrBit told CoinDesk.
By 2021, Ribbon’s structured products offered double-digit returns and emerged as retail-friendly alternatives to the popular cash and carry arbitrage. Last year, the firm launched Aevo, which allowed ether investors to trade options on the chain.
