Option Spreads
Spreads contracts are a combination of two options , one of them is long and other is short. There are two type of spread contracts:
Call Spreads : Lower strike call option is long and higher strike call option is short
Put Spreads: Higher strike put option is long and lower strike put option is short
Motivation and Use Cases
Spread contracts provide a means to take a long/short view on the market with measurable risk. For option sellers, risk is limited as max loss is fixed. For example, a BTC call spread with a strike difference of 500$ can get a max theoretical price of 500$. Therefore, option sellers can’t lose more than 500$ even if BTC moves by more than 5000$.
For option buyers, premiums are lower with a limit on the upside. If a trader is bullish on the market but doesn’t see a very large move, he/she can long call spread with lower premiums.
Advantages of Spreads
One can take a synthetic spread position by going long one leg of option and shorting another leg. However, with the current spreads and fees in crypto options, the entryexit cost of this transaction is very high. It renders the trade less viable as potential profit opportunities are substantially lowered by transaction costs. Spreads solve this problem, in addition to offering several other benefits as described below:
Spreads costs are cut by more than 50% as a single leg is traded, rather than two legs on entry and exit each.
Transaction costs are reduced by more than 50%.
Leverage can be as high as 300x, so margin requirements are significantly lower than trading two single legs.
Specifications of spread contracts
Symbology
Call spreads are denoted by ‘CS’ and put spreads by ‘PS’. General symbology is: CS/PSUnderlyingLong strike Short strikeMaturity
For call spreads, the lower strike is long and is the first strike. For put spreads, the higher strike is long and is the first strike.
Examples Call Spreads: CSBTC300003200028Jul23
CS: Call Spread Underlying: BTC
Long Strike : 30000
Short Strike : 32000
Maturity : 28Jul23 Put Spreads: PSBTC300002800028Jul23
PS: Call Spread Underlying: BTC
Long Strike : 30000
Short Strike : 28000
Maturity : 28Jul23
Margin Requirement
Minimum margin requirement Initial Margin% = min (0.5%, (Strike2  Strike1)/Spot)
Maintenance Margin% = min (0.25%, 0.5*(Strike2  Strike1)/Spot)
Margin computation methodology is similar and margin requirements scale with the position size same as in for other contracts
Settlement Price
Settlement price of a call spread is computed as per the following equation: min(max(0, Spot Settlement Price  Strike1), Strike2Strike1) And, for put spreads as per the following equation: min(max(0, Strike1 Spot Settlement Price), Strike1Strike2) Here, spot settlement price is 30 min TWAP if the underlying price at settlement time.
Launch Schedule
Daily options are launched at 5:30 PM everyday along with other daily options. Weekly options are launched every Friday at 5:30 PM.
Options would be launched on daily, 2 day and weekly maturities. At launch, there will be six call spreads and six put spreads products.
Further details are specified below for call spreads:
Maturity  d  Strike1  Strike2 
Daily  100  ATM  ATM+d, ATM +2d, ATM +3d 

 ATM +d  ATM +2d 

 ATM +2d  ATM + 3d 
2 Day  200  ATM  ATM+d, ATM +2d, ATM +3d 

 ATM +d  ATM +2d 

 ATM +2d  ATM + 3d 
Weekly  500  ATM  ATM+d, ATM +2d, ATM +3d 

 ATM +d  ATM +2d 

 ATM +2d  ATM + 3d 
Example:
Underlying: BTC
Maturity : daily
Spot : 30000
ATM: 30000
d = 100
List of the call spreads that will be launched: CBTC3000030100 CBTC3000030200
CBTC3000030300
CBTC3010030200
CBTC3010030300
CBTC3020030300
List of the put spreads launched will be: CBTC3000029900 CBTC3000029800
CBTC3000029700
CBTC2990029800
CBTC2990029700
CBTC2980029700
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