Blog

September 05, 2018

Stop Market Orders, Estimated Liquidation Price and more new feature

Following the introduction of the Deribit perpetual mid August 2018, we have attracted a lot of new customers from other exchanges. Some of these new customers asked for features that we were planning to add to the platform. Over the last two weeks we have prioritised a number of these requests to make our new customers feel even more at home.

Feature 1 – Stop-Market order


The first and most wanted new feature on the Deribit platform are Stop-Market orders. Deribit customers can use this order type to trigger a stop loss market order when a certain price is reached. This is a useful addition to Deribit’s Stop-Limit orders. Stop-Limit orders trigger a limit order as soon as a certain price is reached. This limit order may not be filled entirely, so user may prefer a market order instead. Both order types allow customers to choose whether the trigger price should be based on the mark price or the index. Note that the index will move faster than the mark price when prices are volatile.

Feature 2 – Estimated Liquidation price

Up until now the interface only showed the liquidation price on the positions table. Unfortunately, this is only there after a trade was executed, which confused some users. Deribit now displays the ‘Estimated Liquidation Price’ before a trade is executed. This way users can know at forehand what risks they are taking on.

The screenshot below shows the ‘Estimated Liquidation Price’ on the pre order dialog.

Feature 3 – Close Position Button and Limit close

Another new feature is the close position button. Users can access the new feature in the ‘Close’ column of the ‘Positions’ tab. Traders have the option to decide if they want to close their position at a specified limit price (gold button) or immediately at market price (red button).

Feature 4 – ROI / Return on Investment

Lastly, Deribit introduces the Return on Investment display on its trading platform which shows the ROI percentage value of open positions. The ROI percentage is calculated with the following formula: ROI = (100% * PnL)/(Initial Margin). The ROI adjusts in real time. This allows customers to easily determine and compare the current state of a trade.

Going forward

For now we are focusing on adding other crypto’s to the platform which we expect to finish within a few weeks.

We are also working on more improvements to the interface, as well as smaller features. If there are any other requests don’t hesitate to ask engage us on Telegram or Twitter. Either you will speak directly to management or we will hear about it.

August 28, 2018

Deribit Perpetual comes out of Beta with 100x Leverage

Deribit PerpetualOn the 14th of August we launched the beta version of our substantially improved version of the prominent Perpetual Swap; the Deribit Perpetual.

In the two weeks since the Perpetual beta was launched, it quickly became the dominant product on the Deribit platform. Thanks to the Perpetual, total volume on the exchange went up by more than 50%. Market makers have also shown an increasing level of support. As a result the Deribit Perpetual trading book has developed into one of the most liquid books in the market with significant size on the bid and offer side.

The Deribit Perpetual provides traders with:

  • Low Fees: Charging just 0.075% on market orders, paying 0.025% on limit orders
  • Extremely fast trading: Executing transactions in a few milliseconds
  • Overload Protection: A flexible system able to deal with any volume
  • Price Stability: Continuous payments and other measures keep the Perpetual’s price close to the Bitcoin price
  • Fair Liquidation: The closing out of a leveraged trade does not hurt more than it has to.

As from today the Perpetual also provides traders with 100x leverage.

100x Leverage

We are now comfortable to increase the maximum leverage to 100x. This means that for every USD in the account (minus the trading fees) you can take USD 100 of exposure.

Liquidation Fees Increased by 0.05%

Deribit tries to make liquidations of leveraged positions as painless as possible. We do this by using step-wise, incremental liquidations in combination with crediting any funds left over after a (partial) liquidation back to the traders. In most cases this brings a position back in line or at least returns some funds to the customer. Our competitors will liquidate the position in one go and not return any left-over funds.

Deribit does charge an additional ‘liquidation fee’ to compensate its reserve fund in the case of a liquidation transaction. As of today this liquidation fee will be increased from 0.10% to 0.15%. We expect this fee increase to cover any additional risks and will allow our reserve fund to continue to grow at a modest pace.

Cross-Margin vs Isolated Margin

Deribit works with “cross-margin” and this means the funds in the account serve to back all outstanding trades. If you want to use isolated margin and apply a certain leverage to a single trade you can use a sub account to isolate the required margin for the trade.

August 14, 2018

Introducing The Deribit Perpetual

Deribit perpetual betaToday Deribit launched a blazing fast version of the extremely popular Perpetual Swap. We are launching this product in Beta, but it is fully tradable. We expect to come out of Beta and add some additional features soon.

The Perpetual is responsible for between 40 and 50 percent of all global trading in Bitcoin. It allows traders to take positions without any bitcoin actually changing any hands. It features low fees and traders can take very high levels of leverage. This means traders can take very large positions with only a small capital outlay.

A Perpetual is a complex product for an exchange to implement. Up till now the only exchange offering it was BitMEX. Thanks to the Perpetual, this exchange is currently the dominant one globally.

Deribit now offers a version that has a number of large advantages over the conventional product.

Blazing fast execution

Deribit already had one of the most advanced platforms in the market. Over the last half year Deribit’s developers worked flat out to make sure that our order execution speed will remain blazing fast even under extremely high volumes. This means Deribit can handle thousands of order requests per second. Even then, order delays wil be at most a couple of milliseconds per order.

The Deribit Perpetual executes orders 20x to 40x faster than the conventional Perpetual on average, and in fast moving markets the difference can be significantly larger. Fast execution can have a significant positive effect on profits, especially in the case of large price moves. It also provides our customers with comfort that there are no preferred parties that are allowed to front run the market.

Continuous pricing

In order to keep its price close to the Bitcoin price, a Perpetual uses so called ‘funding payments’ that occur between the buyers and sellers of the contract. The conventional Perpetual transfers the funding payment every 8 hours and this can cause bumps in the contract price around the moment of payment. The Deribit Perpetual makes tiny payments on a microsecond basis. This completely avoids price disturbances and will serve to keep the Perpetual price very close to the Bitcoin level.

Fair Liquidations

Perpetuals and related products like futures enable traders to take large ‘leveraged’ positions on the basis of only a very limited amount of capital. The capital backing a leveraged trade is called ‘margin’. At the moment Deribit offers 50x leverage so with 1 Bitcoin of margin you can take a 50 Bitcoin position. If the price moves against a leveraged position, eventually the exchange has to close out (liquidate) the position in the market to ensure there is always enough capital to cover the potential losses of the trade.

A number of high profile liquidation related incidents at other exchanges have resulted in large losses for traders. Deribit has designed a fairer liquidation mechanism that executes liquidations on an incremental basis while continuously trying to bring the position back into compliance. If a position is eventually closed out Deribit customers retain any capital that is left over instead of automatically losing their entire margin.

In most cases Deribit is able to stop the entire position from being liquidated or return some of the margin to the customer. Deribit has never had to ‘socialise’ liquidation losses by recouping them from other traders.

Another important advantage of Deribit over other exchanges is that they allow unrealized profits to be used as capital. This means that if a position is profitable, the unrealised profits can be used immediately as capital to open new positions, without waiting for a settlement.

Perpetual Improvement!

The Deribit Perpetual will be in beta initially. We expect it to come out of beta soon with some interesting new features. Other crypto currencies like ETH and BCH will follow pretty soon.

If you have any questions don’t hesitate to contact us on support@deribit.com or join our conversation on twitter or Telegram

For a more technical explanation about the Deribit Perpetual, see our documentation

About Deribit

Deribit was founded by John Jansen, an early crypto investor with a background in options trading on the Amsterdam Options Exchange. In 2014, after a period trading cryptos on different exchanges, he developed a vision of an exchange where it would be possible to trade Futures, Options and other ‘derivative’ products in a secure – high performance – environment. John then proceeded to team up with a group of technical experts to turn this vision into a reality.

After two years of intensive development Deribit went live on June of 2016. Currently Deribit is a top 3 crypto futures exchange and the number one crypto options exchanges globally. We run our business from our office in Amsterdam (The Netherlands) and our development team is located in Poland.

About Perpetuals

A Perpetual on (for example) Bitcoin is a product that aims to closely track the Bitcoin price. It is based on the underlying price of Bitcoin without any real Bitcoins being involved. This makes the product a so called ‘derivative’ product. This means that traders enter into ‘contracts’ with the exchange instead of doing an actual Bitcoin transaction.

In these contracts Perpetual traders pay or receive the difference between the price when they entered into the position and the price when they unwind it. So if the price level of the Perpetual was USD 7500 when someone bought a position and USD 8000 when they sold it the payout is USD 500 worth of Bitcoin for every Bitcoin of exposure.

Traders can buy contracts – called long positions – that benefit from a rise in the price. Conversely, traders can sell contracts – called short positions – that benefit from a price decline. There are always as many long as short positions outstanding, so the exchange has no position itself.

The product is makes it very easy to quickly trade in and out of both long and short positions and features low trading fees. Perpetuals also allow for high leverage. This means that for every single Dollar of collateral in the account a trader can take up to 100 Dollar of Bitcoin exposure.

The product is related to the futures contract but unlike a futures contract a Perpetual does not have a finite term and that is where its name comes from. The price of the Perpetual is kept close to the Bitcoin price by funding payments between the longs and the shorts.

If the Perpetual trades higher than the Index, traders that are long the perpetual need to make funding payments to the shorts. This will make the product less attractive to longs and more attractive to shorts and this will serve to push the Perpetual price back down to the level of the Index. If the Perpetual trades lower than the index the shorts will have to pay the longs.

August 10, 2018

Deribit Introduces Sub Accounts

After our big upgrade last Thursday we promised you a lot of new features and products in the coming period. Today we would like to present the first new feature: Sub Accounts.

Sub accounts allow for the separation of a portion of a trading account, both administratively and from a margining perspective. Every account can generate a maximum of 4 sub accounts that allow for the implementation of managed accounts and dedicated margin for certain trades or strategies.

Managed Accounts Possible

The sub accounts allow for the creation of separate login data but the sub account login does not give any right to withdraw funds. This means a manager or adviser could get access to a sub account and execute trades on behalf of the client without being able to withdraw funds or access the main account.

Isolated Margining of Trades and Strategies

Normally all positions in a Deribit account are cross-margined, this means that there is one pool of available margin for all positions and one sufficiently large liquidation could have a big impact. Sub accounts are individually margined so they can be used to allocate a certain amount of margin to a given trade or strategy.

Say for example that a trader wants to put on a risky trade or a new bot-based strategy; both of them should not impact the total amount of margin if they go wrong. These risky trades or strategies could be assigned to separate sub-accounts protecting the margin in the rest of the account.

Users can instantly transfer funds between the main account and sub accounts. This means margin can be increased and decreased at a moment’s notice.

Here is a video from our co-founder Marius made in order to explain this new functionality:

Stay tuned for even more upcoming products and features that the market has been asking for.

August 09, 2018

Deribit Finishes Massive Infrastructure Upgrade

For more than half a year our development team has been working to drastically change the architecture of our trading platform. The goal was create a platform that is really built to scale, potentially to millions of users. This project was the reason our customers have been waiting for the introduction of new trading products for some time. Yesterday we have executed a massive upgrade, completing our work on scalability. After this upgrade we will start adding new products and features at high speed.
Like with any large upgrade it is possible that the system encounters some problems over the next few days. If this happens we want you to know that we will try our best to ensure any degraded service will be kept to a minimum. If you encounter any issues, please don’t hesitate to contact support.

Background of the upgrade

Deribit used to have quite a traditional architecture where all activities related to a trading book were dealt with on the same server. As we have seen with a number of other exchanges, not properly taking scalability into account can lead to a lot of performance problems down the line. As Deribit intends to drastically increase its scale and does not want to make any concession to its blazing fast execution we needed to solve this problem first.
After this upgrade our exchange runs on a large cluster of dedicated servers, where the matching engines are running on servers isolated from the rest of the internet. The matching engine servers do all the matching and order handling for the trading books. They continuously send out order state updates to the webservers to which all users connect. The webservers do all the work needed to inform the customers about the status of their orders.

The new architecture is extremely flexible. For each matching engine server we can quickly launch an almost unlimited amount of webservers to which traders can connect. At the same time the webservers are kept completely in the loop of the state of the matching engine. This happens in such a way that if a problem would appear on the matching engine server, a web server can easily be converted to become a matching engine server.

This means that we do not even need specific backup servers anymore, as all our webservers are effectively stand-by replacements. Thanks to this new setup, we can now handle a virtually unlimited amount of messages and requests. The matching engine is now also extremely efficient and only has to deal with trade matching, and adding or removing orders from the order books.

Now our platform is ready to deal with any volume, stay tuned because over the next few days we intend to release a number of products and features that the market has been loudly asking for.

July 10, 2018

New Deribit Mobile Interface

We have released a new version of our mobile interface. It has the following major improvements:

  • Reduced loading time by up to 95%
  • Added the ability to trade options
  • Added price charts and order book depth chart

The new Deribit Mobile Interface is available on both the Apple App Store and in Google play Store




Let us know any feedback in our Telegram! We will have an instruction video online soon.

June 29, 2018

Live Deribit Trading Data in Excel

Excel logoTraders often use spreadsheets to model how derivatives will behave. While adding live data can be done by copy/pasting data from our trading application, our traders deserve better. Therefore, we have developed an Excel sheet which uses macros to retrieve live data from our API. Using this sheet as a basis, you can easily access live pricing data for instruments on our platform. You can obtain the Excel sheet here. After you’ve downloaded the sheet, Excel will prompt you to confirm that you wish to enable macros. If you don’t enable the macros, you can still review the sheet, but the data won’t be live.

Using the formulas in Excel

=DERIBIT_INDEX()The Excel macros provides several different functions, which you can use in your formulas. The most useful function is probably DERIBIT_INDEX. This function provides the current value of the Deribit index. This index serves as the underlying of all of our futures, and some of our options. To use it in a sheet, type =DERIBIT_INDEX().

An equally interesting function would be DERIBIT_PRICE, which retrieves the price for a specific instrument. For example =DERIBIT_PRICE(“BTC-29JUN18-6000-C”) would result in 0.0475 (at the time of writing). This is the latest trade price for the call option with strike $6000, expiration date june 2018. Similarly, DERIBIT_MID provides the current order book midpoint. The following price information formulas are available:

  • DERIBIT_PRICE provides the latest trade price
  • DERIBIT_MID provides the current order book midpoint
  • DERIBIT_ASK provides the current best ask price
  • DERIBIT_BID provides the current best bid price
  • DERIBIT_MARK_PRICE provides the current mark price
  • DERIBIT_BID provides the current best bid price
  • DERIBIT_24H_VOLUME provides the current best bid price
  • DERIBIT_IV provides the implied volatility for an option (using the current mark price)
  • DERIBIT_ASK_IV provides the implied volatility for an option (using the current best ask)
  • DERIBIT_BID_IV provides the implied volatility for an option (using the current best bid)
  • DERIBIT_DELIVERY_DATE provides the delivery date.

Accessing historic data

When  DERIBIT_PRICE or DERIBIT_IV is provided with a date in its second parameter, it will provide the price or implied volatility for that date. For example: =DERIBIT_PRICE(“BTC-29JUN18-6000-C”,DATEVALUE(“2018-06-19 06:00:00”)) will result in 0.0850, the latest trade price for the $6000 call option at jun 19th, at 6 am (UTC). 

Generating instrument names

While users can copy and paste instrument names into their Excel sheets, sometimes it is useful to generate instrument names from delivery dates, strikes and option types. To do so, use DERIBIT_OPTION_NAME or DERIBIT_FUTURE_NAME. For example, =DERIBIT_OPTION_NAME(DATEVALUE(“2018-06-19”), 6000, “call”) will produce BTC-19JUN18-6000-C.

Data timeliness

Our Excel macros provide price data with a maximum delay of 15 seconds, although you may need to perform a recalculation using F9 to actually get the latest data. Despite the short delay, we advise users to verify the prices before making a trade, especially on fast moving markets.

Example strategies

When you’ve downloaded the Excel sheet, you’ll find a worksheet with formula examples, and several future and option strategies. Most of these example strategies focus on return on investment, on different settlement prices. Of course, these strategies are just a small sample of the possible alternatives.

 

June 20, 2018

BTC Implied Volatility at Historical Low – Time to Buy BTC Options?

Deribit hosts the only liquid crypto options exchange globally and this generates a lot of unique data. This data allowed Flood to present to the world history’s first implied volatility graph for Bitcoin. We updated this graph with some recent data.

.This article is a follow up from Flood‘s great article about our options platform. Flood’s article explained the basic features of BTC options and discussed the effect of implied volatility (IV) on option pricing.

First Implied Volatility Analysis for BTC

Deribit hosts the only liquid crypto options exchange globally and this generates a lot of unique data. This data allowed Flood to present history’s first implied volatility graph for Bitcoin. We updated this graph with some recent data below.

48-hour rolling implied volatility of most liquid deribit options vs bitcoin price

The BTC implied volatility is the expected future volatility of the BTC price that is implied by option prices (premiums) on the Deribit exchange. All other things equal; higher option premiums imply higher implied volatility. For the statistically minded: the implied volatility is the expected annual standard deviation of the BTC price in percentage points.

For the graph we selected the most liquid call and put for every maturity date outstanding and calculated the 48 hour average implied volatility based on all trades in those options. It shows that volatility was highly variable up to December 2017 as the market was still relatively illiquid. Then, in December 2017, IV went up together with the BTC price.

In the equity market, rising stock prices lead to lower implied volatility, as optimism reduces the equity market’s expectation of risk and hence price variation. When equity markets go down, implied equity market volatility tends to go up.

The BTC market shows the opposite pattern. When the Bitcoin price exploded in December, implied volatility went up significantly as traders took the possibility of further price leaps into account. This was a great period to sell volatility (write options and collect the premium).

When the market went down implied volatility came down, especially after March when the options market started to perceive a range bound trading pattern  as more likely. Earlier this June, BTC implied volatility reached a historical low. After the BTC drop last week it went up by a few points but IV has since receded again.

BTC Option Strategy

This low IV might make it attractive to buy options. Call options might be especially interesting (if you’re bullish) because Bitcoin’s implied volatility tends to go up when the price of BTC rises. This would result in a more expensive option and might generate a double boost to a call option price if BTC goes up. Short dated options might be especially interesting if you believe the market is likely to jump up and down in the short term even if it might be range bound in the medium term.

Let’s look at a concrete example: Today the 20th of June at about 3pm CET you can buy a strike 6000, 27th of July ’18 Call option on one Bitcoin for about USD 880.

Options chain

With this option you receive any positive difference between BTC price and 6000 on the expiration date, the 27th of July. This means you will make money if BTC is higher than 6880 in 37 days. You can not lose more than USD 880 however and this effectively protects you against BTC dropping below 6000. The current BTC price is 6626 so by sacrificing USD 254 (USD 6880 – USD 6626), or 3.8% of a Bitcoin, you are effectively protected from BTC dropping under the 6000 level.

Profit and loss - 6000 call option june (on 27 july 2018)

Plans for the Deribit BTC Options Platform

We intend to start talking about our options platform and options strategies a lot over the next few months. We will also introduce many new products going forward. We recently introduced long dated December options. We will soon be introducing options (and futures) on different crypto’s like ETH and BCH.

We are also working on a more formal implied volatility index which is calculated in a similar way as the VIX, the implied volatility index of the S&P 500. This will be a great information source on expected BTC movements. It might even be a good reference asset for an implied volatility futures contract, like the extremely popular VIX futures.

Have a look out our cheat sheet to find out more about options trading.

Don’t hesitate to ask questions in our Telegram group if you want to discuss any topic related to options theory and strategy. We are there to help you out.

June 01, 2018

Deribit launches December options

Over the last months our option exchange has become significantly more liquid. As this was happening, we received an increased number of customer queries about longer dated options. This is why we decided to introduce the December option yesterday. The underlying of this contract will be our index.

From now on, we will have at least one option with a minimum maturity of 6 months. This means we will launch a March ’19 option before the end of September.

Increase Ticksize

We also increase the ticksize from 0.1 to 0.5 USD to make the order books easier to see. The ticksize from the options went from USD 0.0001 to USD 0.0005.

May 24, 2018

Changelog may 24th

We wanted to report on the successful maintenance we just executed at 10:00 UTC. Besides various fixes and optimisations to the backend and engine, we have implemented the following changes.

Front end

  • Placing hidden option orders is no longer allowed
  • Improved speed of Orders History table, especially for users having a huge history.

API

  • small fix in getmargins api
  • fixes in execution report
  • fixed logout action
  • some other small fixes here and there