Interview with Aaron Gong of Binance: Options have been online for a week, and the trading volume has exceeded 1 billion US dollars
Author | Qin Xiaofeng
Editor | Hao Fangzhou
Produced | Odaily
Author | Qin Xiaofeng
Editor | Hao Fangzhou
Produced | Odaily
image description
(Aaron Gong, Director of Binance Futures)
The options market continues to be hot.
Since the end of last year, Bakkt, CME (Chicago Mercantile Exchange), LedgerX, and OKEx have successively launched options trading, and Huobi is also interested in entering the market.
On April 13, Binance once again extended its front line and officially launched options trading. However, unlike the traditional option model, Binance options have some "atypical" features: the seller can only be Binance, there is only one exercise price, and the exercise time varies from 10 minutes to 1 day.
Recently, Aaron Gong, Vice President of Binance Futures (Binance Futures), accepted an exclusive interview with Odaily, responding to questions about Binance Options from the outside world.
Aaron Gong：Aaron Gong said that the currently launched App-side options are positioned to serve retail investors, and the web-side will be launched in the future to serve professional option traders; and Binance will open seller permissions in the future web-side; in addition, only one strike price is set for It is more convenient for users to use, and has better liquidity, avoiding the embarrassing situation of option closing without quotation.
Aaron also revealed that the current option has been online for a week, the total transaction volume has exceeded 1 billion US dollars, and the average daily trading volume has exceeded 100 million US dollars. It has become the number one option exchange, far exceeding the average daily option trading volume of Deribit (5 tens of millions of dollars).
Aaron Gong：The following is the transcript of the interview, organized by Odaily:
1. Odaily: On April 13, Binance launched a new business option trading. The first question is, why does Binance want to trade options?
From the perspective of the derivatives market, after futures are available, the next product is options, because options are more dependent on the liquidity of the entire futures market. We feel that the Binance futures market is very mature now, and the liquidity is also doing very well, so we decided to launch option products at this time. In addition, taking into account the needs of the current market, some investors are interested in options trading, and we will try our best to meet the needs of users.
2. Odaily: During the development of Binance Option, what problems did you encounter and how did you and the team solve them?
The option plan can be traced back to December last year at the earliest, but the real shape is still in the first quarter of this year. As for the problem, it is actually not a technical level, because our options team and futures team are actually the same team, and the option system is also developed based on the futures system, so we are still very confident in the technical level.
The bigger difficulty at that time was how to position and design products? At the beginning, we also had a lot of discussions internally, what kind of option products should we make? Is it a traditional option product like Deribit and CME (Chicago Mercantile Exchange), or an innovative product?
Aaron Gong：When doing product research, we learned that many retail investors have high cognitive requirements when trading these traditional option products, which prevents users from entering the world of options. For example, traditional options involve different exercise times, exercise prices, time values, etc. In fact, this is a very complicated three-dimensional system. It is precisely because users do not understand that they do not trade on Deribit and CME.
Therefore, based on what we have learned, we have also clarified our product positioning: to make an options product that is more user-friendly and easier to understand. Therefore, the options page we designed is actually very friendly to pure whites. There are no multiple strike prices. Users only need to click to buy call and put options; in addition, we also launch short-term options, ranging from 10 minutes to a day wait.
In fact, before the launch, we also had a lot of doubts internally, thinking that this product is too innovative, and the final effect may not be satisfactory. There is even a plan, if this option product does not work well, it will be removed from the shelf and discussed again. Unexpectedly, without any large-scale publicity, the options will usher in explosive growth after they go online, which is beyond all of our expectations.
3. Odaily: Binance Options has been online for a week. Could you please introduce the relevant data of options trading?Here I would like to disclose first, in fact, it is not Deribit that currently has the largest option trading volume, but us. Within a week after the launch of Binance Options, the trading volume has exceeded 1 billion US dollars, with an average daily trading volume of more than 100 million US dollars. During the same period, the average daily options trading volume of Deribit was only 50 million US dollars.）
Especially on April 20, we had a turnover of US$300 million; on April 21, the turnover was almost US$220 million. We now trade 6 times the volume of all other options markets combined.
Aaron Gong：From the perspective of user portraits, Binance’s option products are actually mainly retail investors. The number of active options users is definitely not as large as the number of active futures trading users in the same period, probably less than 5% of the active users of futures trading.
(Odaily Note: Deribit option trading is mainly for professional users, click to read
"Interview with Deribit Liu Xiaotong"
Aaron Gong：4. Odaily: You just mentioned that Binance Options is an innovative product. We have also observed that Binance options do have many unique features, and they can even be called "atypical options". For example, the seller of Binance options can only be Binance, and option users cannot be sellers. Why is it designed this way?
First of all, whether it is a traditional market or an encrypted market, there are certain restrictions on option sellers (such as capital restrictions), and it is impossible for all users to be sellers. In addition, the option seller needs to bear unlimited risks, and the risk factor is high. The positioning of Binance Options is retail investors, and we do not want retail investors to bear excessive risks at this stage. Furthermore, not all retail investors want to be sellers, and the demand is not that great. Based on the above, we choose not to open the seller permission for the time being.
Later, we will launch the web version, and at that time, the option seller authority will be opened, but only for some qualified customers, allowing them to sell options. The specific quantitative standards are still under discussion, but it should refer to some regulations for sellers of traditional options exchanges such as CME.
5. Odaily: There is only one strike price for Binance options, why not set more strike prices? What are the considerations for the option exercise price against the BTC/USDT price of the Binance futures contract?
Aaron Gong：Setting an exercise price is considered from the user's point of view. If the strike price is too high, the out-of-the-money option will be very illiquid as the market moves. For users, in order to liquidate out-of-the-money options, they need to bear a large liquidity loss. In some options markets, when there may be high volatility, your options may not be quoted.
From the perspective of product design, mobility is always the first priority. Now our option products, at least guarantee that under any circumstances, we have sufficient liquidity and there will always be quotations.
As for why options are chosen as the price target, it is because our futures are more liquid than spot. In fact, our futures price index also refers to the spot prices of multiple exchanges as a source, which can better reflect the real market situation than the single Binance spot price.
6. Odaily: For users, the option fee is the most important concern. Since Binance is the only option seller at present, many people may question: Is the option fee quoted by Binance reasonable? How would you respond to this question.
Aaron Gong：Option premiums are often set according to the degree of market risk. As for whether it is reasonable or not, we can only use data to speak. I can say this: Under the same conditions, compared with other options exchanges, Binance’s option fees must be not much less. Why?
First of all, we are American options, which can be exercised at any time; while other options are currently European options, which can only be exercised at a specific time. Theoretically, under the same conditions, the American option premium will be higher than the European option premium.
Aaron Gong：However, you will find that compared with Deribit, our option fees are basically the same price or even cheaper sometimes. But because they are European-style options, we are American-style options, so even if they are at a similar level, we are actually cheaper. In fact, our option premiums are currently the cheapest in the entire market.
7. Odaily: Why are Binance options cheaper?
Because we decided to give the profit to the user. In other options exchanges, option sellers (market makers) want to earn more premiums, so they set the option prices higher, and users have to pay higher option fees. From the very beginning, Binance Option is for the benefit of retail investors, so when we act as option sellers, we are willing to lose part of the benefits and transfer them to users, and we will not set the option price too high. In addition, there is no handling fee for option trading, and the transaction fee has been included in the option fee.
8. Odaily: Currently, Binance has launched BTC options, and there are five types of exercise time (10 minutes, 30 minutes, 1 hour, 8 hours, 1 day). Which currency options will be launched in the future, and will the exercise time be further expanded?
Aaron Gong：Like the contract, initially we will focus on the BTC option product and concentrate all resources on development and operation. After the BTC option products have successfully entered the market, we will launch more option products. When the liquidity of an option is established, we will list another option.
As for the speed and rhythm of going online, I think it should be similar to futures. Now there are 24 futures trading pairs, how many options there will be, it is not known yet, the assumptions about the future are still in dynamic changes, everything depends on the market reaction.
Aaron Gong：The exercise time will also be expanded, adding different times such as the next day, week, and quarter. There should be no "years". I think the market demand may not be too great.
9. Odaily: You mentioned earlier that the web version of options will be launched in the future. What is the difference between it and the current APP?
The biggest difference is that the positioning of the future web page is professional investors, so the design will be more biased towards traditional option design, such as the aforementioned open option seller. The APP will still target retail investors, so the page design is simpler and easier to understand, lowering the threshold.
Aaron Gong：10. Odaily: Can you talk about your personal understanding of options?
