Level01 Derivatives Exchange
Level01 is an exciting new derivatives exchange that is in development for allowing peer to peer transactions of options contracts. To accomplish this, they will be using blockchain technology. The platform intends to provide derivatives trading in stocks, cryptocurrencies, forex, and commodities between peers, completely eliminating the need for a third party broker. Through the use of blockchain, transactions are made transparent and automated. After a trade is finished, profits get instantly moved to the corresponding wallet. It is the hope of Levelo01 to make these derivatives more accessible to the population while being easy to use. This is one of the best real world uses that blockchain technology can offer. While still in its early stages, companies like Level01 can advance awareness and use of the technology.
I think that derivatives like options are one of the greatest financial instruments that exist today. They can be used in endless ways and combinations, as well as serve as an excellent way to limit and mitigate risk. Using options, an investor can be long, short, or neutral to the markets.
One of my favorite options strategies is the calendar spread. This is where an investor sells a near term option and buys a longer term option with the same strike value. Say a security is trading at $100. You could potentially sell a one month 100 call for say 2 dollars, and at the same time buy a two month 100 call for maybe 3 dollars. This makes the total cost of the spread one dollar. The idea with a calendar spread is to profit from time decay of options. A near term option decays at a faster rate than longer term options. Assuming the price of the security is unchanged and implied volatility is also unchanged after one month, then the near term option will expire worthless, and the farther option would be worth $2. This would result in a one dollar profit. When you purchase a calendar spread, the maximum value that you can lose is the cost that you paid for it to begin with. Even if the price moved a good deal away from the 100 strike value, there would likely still be some value left in the longer term option. That is the nice thing about options, you can limit your risk. This is only one example of the possibilities that are available with options. There are endless ways to use them for different circumstances.
The derivatives market and the cryptocurrency market are both very large and growing. Level01 is positioned to take advantage of the opportunity in this space. They plan to offer a trading platform for iOS, Android, and web browsers. Trade settlement will occur on the blockchain with the Level01 platform. Funds are never held by Level01. Trade history is stored and accessible to users with analytics integrated for viewing patterns and history. There will also be a chat feature to allow messages between parties for trade suggestions and more. These are just some of the features to be offered by Level01. To read more about them, take the time to visit the links below and also read the whitepaper.
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