XRP-related options were introduced by cryptocurrency derivatives exchange BIT The exchange announced the new product in a press release, stating that users will be able to trade XRP options without having to keep the cryptocurrency and that gains and losses will be settled in dollars. The duty of creating order book liquidity falls to institutional liquidity provider OrBit Markets.
The new product adds to BIT’s existing selection of options for cryptocurrencies like ADA by Cardano, ETH by Ether, BTC by Bitcoin, TONNE by Toncoin, and LADYS by Milady Coin.
Options are a type of derivative contract that allow the buyer the option to buy or sell the underlying asset at a predetermined price on or before a particular date. A put option grants the right to sell, whereas a call option grants the right to buy.
By “writing” options on top of their spot market holdings, traders can reduce their exposure to bullish or bearish risks or increase their revenue.
“We are honoured to be among the first exchanges to enable simultaneous long and short options trading for institutional and individual traders, enabling XRP options trading. According to Justin Buitendam, worldwide head of institutional sales at BIT, “We look forward to making this product available to more traders and investors alike across the globe.”
At the time of publication, XRP has a market valuation of $30.88 billion, making it the fifth-largest cryptocurrency in the world. Like other alternative coins, the cryptocurrency has a tendency to be more erratic than ether and bitcoin.
Following a highly anticipated hearing in the U.S. SEC’s case against Ripple Labs for breaking securities law through XRP sales, a U.S. District Court ruled that while XRP is not a security when offered over centralised exchanges, it is one when sold directly to institutions. This decision led to BIT’s decision to list XRP options. The SEC’s attempts to lump all alternative cryptocurrencies together were thwarted by the distinction.
Since then, the XRP spot market has been re-listed on a number of exchanges. Recently, the SEC filed a request to appeal the court’s decision, which has caused the market to experience fresh uncertainty. Following the July 13 court decision, XRP rose by over 70% to around 95 cents.