Bitcoin and Ether Options Tied to US Election: Smart Move or Just Hype?

Bitcoin and Ether Options: A Hedge Against Election Volatility

Deribit, a leading crypto options exchange, has announced new options expiring four days after the U.S. elections on November 4th. These options will allow traders to manage their bitcoin (BTC) and ether (ETH) positions in the context of the election's outcome.

Traders are welcoming this move, seeing it as a way to define risk and protect capital from the expected volatility surrounding the election. Jeff Anderson, a senior trader at STS Digital, highlights the importance of hedging against uncertainty, especially considering the potential impact of the election on fiscal policy and financial stability.

Trump's Impact on Crypto

The election's significance is even greater for cryptocurrencies, given Donald Trump's recent embrace of digital assets, setting him apart from his opponent Joe Biden. While Trump hasn't outlined detailed crypto regulation proposals, his support from Bitcoin miners and his presence at the upcoming Nashville conference have secured the industry's backing, positioning BTC and the broader market as a bet on his presidency.

This increased price volatility in the lead-up to and after the elections necessitates using derivatives like options to hedge portfolios. Options offer insurance against both bullish and bearish price movements. Call options protect against upside volatility, while put options hedge against price slides.

Deribit's Election Expiry Options: A Smart Move?

Deribit's election expiry options, launching on July 18th, will expire on November 8th, providing a three-day buffer after the election results. Laurent Kssis, crypto ETF specialist at CEC Capital, believes these options are a smart move, enabling traders to position themselves strategically before, during, and after the election.

Options: A Common Strategy for Binary Events

Traditional market traders frequently use options to manage exposure during binary events such as U.S. elections or corporate earnings, where outcomes are uncertain. CME, a global derivatives giant, explains the strategy of buying a straddle—purchasing both a put and call option at the same strike price—to hedge against an explosive move in either direction. This strategy is often employed before major economic releases or company earnings reports.

By offering election expiry options, Deribit provides traders with a valuable tool to manage risk and navigate the potential volatility of the U.S. elections. The platform's move highlights the growing importance of derivatives in the crypto market, particularly when faced with significant global events.