Spotlight on Huobi Challenge#3 : Trade options On Huobi App

Hi steemains, after the previous publication regarding Perpetual Swaps, I will present today in this third post in the #ilovehuobi contest a new derivative product of Huobi Futures namely Option contracts which are a form of financial derivative which gives the trader the right, but not the obligation, to buy or sell at a specific price on a certain expiration date.

On Huobi Futures, the option trading process requires that the option buyer can only be exercised at expiration. Currently, option contracts are only available for Bitcoin and Ethereum which are quoted in USDT.

What are option contracts?

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Options have long been a popular derivative trading tool in the traditional space, but this type of trading has also recently invaded the cryptocurrency space. An options contract is similar to a futures contract with the main difference being that the trader has an option, rather than a bond, to buy or sell on a fixed date at an agreed price.

Options are popular derivative trading contracts for a number of reasons, not least because they are more profitable. These contracts also offer a leverage function, but in general the premium is much lower than the spot index which means that, compared to spot trading, users only have to pay the premium to have a position in order to have the same possibility of profit / loss.

Options are also less risky, as the maximum loss an option holder can suffer is the options premium while there is almost unlimited profit potential. Hedging can also be effectively achieved on option contracts against the spot market and be used in arbitrage.

Options can also be used in conjunction with other trading methods and strategies and due to their effectiveness in a rising, falling or stable market, they can be effective in taking profits as long as the right goals are set.

Option contracts on Huobi:

Huobi determines the underlying USDT asset for both Bitcoin and Ethereum options by giving the BTC / USDT and ETH / USDT indices, this choice to set the option price in USDT, unlike other exchange platforms including the premium is denoted in BTC, and it gives Huobi a huge advantage because the price of USDT Stable without any price movement against the BTC Index or other cryptocurrencies.

Among the strengths of this platform are low minimum positions of 0.001 BTC, allowing traders to open an options position with around $ 20 compared to other exchange platforms where the minimum position can cost up to at 1 BTC. Also, Huobi Futures does not charge multiple fees - just basic trading fees and delivery fees. No additional charge is required. These fees are also relatively low between markets.

How to trade options on Huobi App

• Install the Huobi application through Android or IOS, for my case I use Android.

• Open your Huobi application, select “Futures” at the bottom, then choose the “Options” tab.

• If this is your first time trading options. You need to verify your identity by following the following steps:

• After verification, select the button in the upper left corner to find options of different types and you have the choice to trade between these options.

1- As a buyer of call / put options :
Before you start trading as a buyer, you must send USDT to the options account. To do this, press “USDT equity” and access the “Transfer” page. Choose “USDT” and set the quantity, then tap “Transfer”.

How does the purchasing process unfold:
As a buyer, to open a position by placing a limit order, you can choose to buy an option by setting the purchase quantity and price, then select "Open long" so that the order will go through with freezing a USDT amount. After the order is fulfilled, you must pay the premium and the transaction fees.

2- As a call option seller
To open a position, a seller must freeze the performance margin. For example, in BTC options trading, at the beginning the seller has to send BTC to the options account. Select the tab on “BTC equity” and navigate to the asset's “Transfer” page. Choose “BTC” and set the quantity, then tap “Transfer”.

How does the process work:

For example, if a seller places a limit order to sell options. You must set the price and quantity, then choose on "Open Short". After ordering, you need to freeze BTC amount as performance margin. On execution of the order, you pay the transaction costs, you would have the premium paid by the buyer.

For more information on options and its trading rules Click on the “…” symbol located at the top right corner and choose “About Futures”.

Conclusion :

Huobi also takes security and risk management very seriously and has mature risk management technical support and extensive experience. Huobi Futures risk management aims to mitigate liquidation risks while providing high leverage on its options contracts.Good trading!