Lastly, we would be remiss if we failed to mention the various other yield enhancement structured product strategies that do not explicitly sell options at all. Source: GSR. Note: Short call spreads are a bearish strategy (negative delta), short put spreads are a bullish strategy (positive delta), and short straddles, strangles, and iron condors are short volatility bets that take less directional risk (delta neutral or close to it). See Appendix C for DOV alternatives. Other examples include levered staking vaults, vaults that manage concentrated liquidity positions on Uniswap V3, and other yield-based strategies. For example, Opyn’s Crab Strategy vault is similar to a straddle, but it generates yield via funding by pairing a short Squeeth position versus long ETH in a delta-neutral fashion.

12%, respectively. Together, these three exchanges comprise nearly 90% of the $2 to $3 trillion of perp volume that regularly trades each month. Though derivative DEXs represent just 1-2% of centralized futures volume today, they may gain share with centralization risks recently elucidated by FTX and several others. Source: Laevitas, GSR. Data as of May 10, 2023. Note: The pie chart is an illustrative snapshot only meant to illustrate the number of assets that have listed perps. In addition to CLOB-based centralized derivative exchanges, there are also decentralized exchanges that facilitate permissionless perp trading.

In fact, CME crypto futures volume comprises the majority of all calendar futures volume today, and CME crypto options volumes rival competitors like Bybit, OKX, and Binance. With that said, CME’s footprint is still relatively small after factoring in perps volume and Deribit’s options volume. For this reason the term spot price as it pertains to perps is commonly referred to as the index price, and it’s typically calculated as a volume-weighted average of the spot price across multiple spot exchanges. Trading crypto derivatives on fully regulated exchanges has become increasingly attractive after FTX’s collapse, particularly for traditional financial institutions. 6. Given the vast number of exchanges in crypto, the term spot price in crypto isn’t as clear as in traditional markets.

Implied volatility uniquely impacts option prices due to their asymmetry, making it a distinguishing factor that does not impact the price of linear derivatives like futures. All told, option prices are impacted by the price of the underlying asset and its corresponding cash flows (if any), implied volatility, interest rates, and time to expiration. Options are also uniquely impacted by the passage of time for this same reason, as time is inherently valuable when the distribution of payoffs is positively asymmetric3.