Deribit’s New Simulation Allows Traders to Test Complex Strategies

Deribit’s New Simulation Allows Traders to Test Complex Strategies

Crypto derivatives platform Deribit has announced a position building tool that helps traders simulate positions across a variety of the exchange’s products. The tool comes with portfolio analytics and dynamic positional P&L tracking. This tool will prove useful for traders looking to implement complex strategies that would be difficult to manually track and measure, January 9, 2019.

Simulation Tool for Derivatives

The new position builder offered by Deribit is an incredibly innovative way to get people to dabble with options and futures spreads. Derivative strategies offer superior risk management relative to just holding directional contracts. A straddle is type of options spread where the trader purchases a call and a put at the same strike price for the same expiration date. Effectively, such a strategy hedges the trader against choppy markets and acts as a way to profit during volatile times.

Executing such strategies in crypto is difficult, other than the fact that there aren’t many liquid avenues to trade crypto options. In an already complex asset class with hyper-volatile spreads and prices, constantly calculating positional profit and loss as well as monitoring other indicators is cumbersome.

Deribit’s new tool will not only give traders the ability to simulate these positions, but also keep a track on things like time decay (theta), gamma, delta, and other Greek options variables that help paint the entire picture.

Rise of Crypto Derivatives

Looking at the way things are progressing, the growth of crypto derivatives up to date might be dwarfed by the advancements of the next few years. Crypto derivatives are not tools for price discovery at the moment, but as the liquidity of these contracts deepens there will be an unmistakable shift towards derivatives.

The introduction of derivatives in equities, commodities, and currencies led to a major shift in the way the structure of these markets looked. The same is inevitable for cryptocurrencies, but at this nascent stage, a spot dominated market only makes sense.

As more people in crypto learn how derivatives work and more institutional speculators foray in crypto, derivatives will play a massive role in both price discovery and risk management.

Ashwath Balakrishnan

Ashwath is a financial market and technology junkie. He is a cryptocurrency investor, trader, and enthusiast. He has expertise in market psychology and explaining complex technology in a simple way. He aims to battle misinformation in the cryptocurrency space.