Options Trading & Market Making in Crypto

In essence, an option is a contract that allows, but doesn't require, a trader to buy or sell an underlying instrument like a security or an asset like Bitcoin at a predefined price over a specific period of time.

What Are Option Strategies?

Option strategies are the coinciding buying or selling of one or more options that differ in one or more of the options’ variables. Call options or Calls give the buyer the right to buy a single asset, a stock or an ETF at that option’s strike price.

What is the Role of Market Makers in Options Trading?

Market makers’ undertaking is to provide liquidity, depth, and spread among markets. The role of market makers in the option trading and options exchanges is to ensure that the markets run smoothly by enabling traders to buy and sell options even if there are no public orders to match the required trade. In order to be able to do this, market makers are usually required to maintain large portfolios and a range of different options contracts.

Due to the exponential growth of decentralized finance and the cryptocurrency exchanges(both centralized and decentralized) the need for liquid markets has grown too. Avatea taps into this new industry and expects all decentralized projects to move to fully decentralized market making protocols.

Avatea enables both the project’s team as well as significant holders to sell their holdings in a responsible way without affecting the project’s valuation.This allows projects to take full control over their own market making and make direct adjustments.

Avatea furthermore, enables users to utilize their cryptocurrencies by supplying tokens to the network that may be borrowed to create liquidity.

This creates a secure lending environment where the lender receives a compounded interest rate annually (APY) paid per block, while the borrower pays interest on the cryptocurrency borrowed.

You can learn more about the Avatea protocol and how it works here.

Post originally appeared on: https://avatea.io/options-trading-market-making-in-crypto/

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