Cryptocurrency derivatives platform Delta Exchange has introduced a feature it says will help generate passive income for its users through the use of automated call options.
Options allow traders to buy or sell a security at a specified strike price before or on a given date. The strike price in derivatives market terms is a set price at which the owner of the option can buy or sell the underlying asset, in this case, bitcoin or ether.
Singapore-based Delta Exchange said in the same way exchange-traded funds simplify crypto exposure, investors won't need to learn or experiment with complex options strategies as they can select from a menu as they see fit.
“This product is focused on helping investors participate in more complex options strategies without having to execute them," Delta CEO Pankaj Balani said. "It is focused on generating high yields with passive management.”
If the price of an asset is greater than the strike of the option being shorted, then a user's bitcoin is sold automatically at the strike price, allowing the user to pocket the difference.
Conversely, when a user's option contract expires and the price of bitcoin is less than the strike price, the automated strategy doesn't sell the asset and the client retains his or her bitcoin. That allows users to avoid high-risk situations and results in earnings, the exchange said.
"As the options markets continue to mature, we believe structured products will become a viable option for all traders," Balani said.