**1. Introduction**

**2. Example (Options)**

**Example 1:**You buy a call option with strike price 10,000 USD for 0.05 BTC. This is the right to buy 1 BTC for 10,000 USD. Imagine at expiration, the BTC index reaches 12,500 USD and expiration (delivery) price is 12,500 USD. Now this option will expire with a value of 2,500 USD, which is 0.2 BTC at a price of 12,500 USD for 1 BTC. So at expiration of the option your account will be credited with 0.2 BTC. Your initial purchase price was 0.05 BTC, your profit is 0.15 BTC

**Example 2:**You buy a put option with strike price 10,000 USD for 0.05 BTC. This is the right to sell 1 BTC for 10,000 USD. Imagine at expiration the delivery price is 5,000 USD. This option will expire with a value of 5000 USD, which is 1 BTC with BTC priced at 5,000 USD. So as owner of this option, your account will be credited with 1 BTC at expiration. Your purchased the option for 0.05 BTC, so your total profit is 0.95 BTC.

**Example 3:**You sell a put option with strike price 10,000 USD for 0.05 BTC. The delivery price at expiration is 10,001 USD. The option expires worthless. Buyer lost 0.05 BTC, seller won 0.05 BTC.

**Example 4:**You sell a call option with strike price 10,000 USD for 0.05 BTC. The delivery price at expiration is 9,999 USD. The call option expires worthless. Buyer lost 0.05 BTC, seller won 0.05 BTC.

**3. Contract specifications options**

- Symbol: The symbol of an option consist of : “underlying-date-strike-c/p”, for example “BTC-30MAR18-10000-C” is a call option on 1 BTC, with strike 10,000 USD, exercised on 30th of March 2018
- Underlying: Deribit BTC index. The index is composed of 6 leading BTC-USD exchanges, currently Bitfinex, Gemini, Bitstamp, GDAX, Kraken and Itbit. Every 6 seconds the index is calculated by taking average of bid-ask from those 6 exchanges, removing highest and lowest value, and then take the average of the remaining 4 values. This to reduce the risk of significant impacts of flash-crashes. Bitfinex is at this moment not active in the Deribit Index, leaving the other 5 exchanges.
- Multiplier: 1 (The usual underlying of stock options is 100 shares. On Deribit exchange there is no multiplier. Each contract has as underlying only 1BTC (priced by Deribit BTC index)
- Strike price intervals: depends on the current bitcoin price. Can vary between 500 USD and 2000 USD.
- Strike prices: In-, at- and out-of-the-money strike prices are initially listed. New series are generally added when the underlying trades through the highest or lowest strike price available.
- Premium Quotation: In BTC, .minimum tick is 0.0001 BTC (1/10000 BTC, or at exchange rate of 10000 USD/BTC that would be 1 USD/tick). On the platform the equivalent in USD is shown in the trading table, based on current BTC index price.
- Expiration date: Each Friday, expiration at 08.00 UTC.
- Exercise Style: European style with cash settlement. European style options can only be exercised at expiration date. This happens automatically on Deribit platform at expiration. No action from trader is required.
- Settlement value: Exercise will result in delivery of BTC-cash immediately after expiration. The exercise-settlement value is calculated using the average of the Deribit BTC Index over the last 30 minutes before expiration. The exercise-settlement amount in US $ is equal to the difference between the exercise-settlement value and the exercise price of the option. To get the final amount in BTC, this amount gets divided by the exercise-settlement value (the average of the BTC-Index in last half hour of trading).
- Mark price: Mark price is value given to the option by the risk engine during trading hours. I It is the average between bid and ask price whenever possible, but the price has to fall within limits set by Risk Management of Deribit. This is done by setting a minimum and a maximum of volatility implied by the option price (implied volatility). For example minimum 50% and maximum 80% implied annualized volatility. If the average of bid/ask at any time is above or below those values, those values will be used instead for the relative option. The mark price is also the valuation used for profit/loss calculations for open positions.
- Position limits: Currently no position limits are in effect. Position limits are subject to change. At any moment Deribit could impose position limits.
- Margin: Please refer to Margin Calculation
- Trading hours: 24/7
- Minimum order size: 0.1 option contract on 1 BTC

**4. Margin Calculations**

**Long call/put**

**Short call**

**Short put**

## 5. Portfolio Margin

- Lower margin requirements
- Increased leverage

- To qualify for Portfolio Margin, you must maintain a minimum net equity of 1 BTC.
- Trader needs to have some experience trading options and declare to have understanding about the concept of portfolio margin

- maximum price move of +/- 10.00%
- maximum implied volatility change of SQRT (30/days to expiration)*26.00%. (Example: options expiring in 30 days: IV change of maximum 26.00%, options expiring in 15 days: IV change of maximum SQRT (30/15)*26.00%
- Contingency component of 0.5% of underlying value of all options in portfolio. (Example: you have 200 options in your position (long and short), 0.5% of 200 BTC = 1 BTC is added to the portfolio margin calculation.
- Contingency component of 1.50% of underlying value is added for offsetting futures. (Example: you are long 100 BTC in Future A, and short 100 BTC in Future B, then 1.50%*100 BTC will be added to the portfolio margin calculation.
- Contingency component of 0.00% for VEGA’s offsetting in different expirations. (Example: you are net long 10 VEGA in Expirations A/B/C, and net short 10 VEGA in Expirations D/E/F, we will add a contingency of 0.00% thereof to the portfolio margin calculation.

**Please note that the liquidation process for portfolio margin users targets to reduce the risk of your position by trading futures at first. This can also result in opening new futures positions but will reduce the risk profile of your position. Any options could also be traded, but only reducing positions, but due to the low liquidity in options market, liquidating options positions can be more hurtful than simply delta hedging the position with futures. Whenever maintenance margin is higher than 100%, it is to the discretion of Deribit risk management how to handle your position in an attempt to reduce the risk of bankruptcy.**

**6. Order types (Options)**

**Filling the options order form, you can choose to determine the price in 3 ways: giving the price in BTC, giving the price in USD, and giving the price in Implied Volatility.**

**7. Historical volatility chart**

**8. Mistrade rules**

Due to various reasons it can happen that options are being traded at prices that can be regarded as having taken place in an abnormal non orderly market, where the chance is very high that one side of the trade has been done unwillingly. In such cases Deribit might adjust the prices.

Price adjustments of option trades will be only done if the traded price of the option was further away from the theoretical price of the option than 5% of the underlying (0.05BTC for BTC options). For example if an option is traded at a price of 0.12BTC and its theoretical price is 0.05BTC, trader can request for a price adjustment to 0.10BTC.

If a trader realises a trade executed at a price regarded as being mis-priced, he should write an email to the exchange (support@deribit.com) asking for a price adjustment.

The theoretical price of the option is the mark price, though it is difficult for the exchange to at all times have the mark price exactly at theoretical prices. So in case of disagreement about the theoretical price, this price will be determined consulting primary market makers on the platform. Deribit will follow their recommendations as for what was the theoretical value of the option at the moment of trade.

A request for a price adjustment of a trade has to be made within 2 hours after the moment of trade.

**9. Market Making Obligations**

**Please note that at this moment we cannot accept new market markets. (others than those with whom we are communicating and are already preparing to connect).**