Options strategies: how to trade crypto options: Juthica Chou from Kraken

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But that’s exactly what Goldman Sachs trader Juthica Chou did. Leaving Wall Street to work in the cryptocurrency world was always going to be seen as risky. But leaving Wall Street in booming 2013 to work on a crypto derivatives exchange might have seemed crazy to some.

It’s a bet that paid off. The crypto derivatives market is now booming, as a recent study by Carnegie Mellon University’s CyLab highlights.

Chou, who focused on high-frequency options market making, packed his office eight years ago and co-founded LedgerX, a digital currency options and futures exchange.

On average, the volume traded in the cryptocurrency derivatives markets exceeds the cryptocurrency spot markets by a factor of five, according to Kyle Soska, the lead author of the study who presented the results at a conference.

Derivatives are financial contracts between two parties that derive their value from an underlying asset. These assets can be stocks, bonds, as well as many other financial assets, including cryptocurrencies.

They can be used to hedge a position or just to speculate. The most common types are futures and options.

Options trading

Juthica Chou, Head of OTC Options Trading at Kraken

Chou facilitates crypto options trading for institutions and high net worth individuals in his role as head of OTC options trading at Kraken, the fifth largest crypto exchange, according to CoinMarketCap.

Kraken

It was the volatility that I think really motivated why we wanted to fill this role and why I took on this role at that time i.e. it created a lot of Interest and demand from clients for options trading, Chou said.

Options are an agreement between two parties to buy or sell an asset at a future date. The owner has the right, but not the obligation, to buy or sell the asset at a specified price on a certain date.

They have become an important commodity for improving crypto adoption, Chou said. Companies and individuals can hold larger amounts on the balance sheet while managing volatility, she added.

Trading over-the-counter options means tapping into a network of individual dealers, rather than using a central exchange, such as the CME, which offers cryptocurrency futures and options, for example. The biggest advantage of the OTC is that it can execute large transactions in bulk with a certain degree of anonymity and without having a disproportionate impact on the price of the underlying asset.

This extends to options where clients sometimes want to be able to complete a fairly large options trade, and again minimize the impact and execution time if they had to go to an exchange to do so, Chou said.

I don’t think they were put off by the price action, Chou said. And if anything, they’re just looking more opportunistically for different ways to position themselves, in our case using options, but generally in the market.

Much like other banks and crypto exchanges, such as Bitstamp and Anchorage, Chou continues to see significant demand from customers despite the nearly 50% drop in prices from highs in mid-April, when bitcoin was around $ 64,000.

The second strategy is that, with cheaper option prices and lower volatility, some clients are looking to place opportunistic directional bets until the end of the year, Chou said.

With lower volatility in recent weeks, with the market trading sideways, Chou has seen more and more players looking to sell volatility, with the idea that it will drop or simply as a way to collect premiums and returns. options.

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