Introducing the Bitcoin Halo Option

As GSR continues to innovate in the Cryptocurrency derivatives space one observation we have made is that many good trading strategies are often undermined by weak risk management and whilst a lot of time is spent on how to take risk, not enough consideration has been given to how to manage risk when things don’t go to plan. For example, it’s not unusual to see BTC have a significant dislocation which can be triggered by a chain effect of stop losses or indeed poorly performing exchange hardware ‘overloading’ and preventing liquidity providers entering the market. Choosing stops correctly and managing liquidation risk is time consuming, capital intensive and distracting. Not to mention that Crypto is a 24 hour market and positions require constant supervision.

The Bitcoin Halo Option is an option on the value of a trading account. The holder pays a premium upfront to buy the option, the trading account starts with a value of zero and the holder is permitted to do 10 trades per day in the BTC/USD market via GSR until maturity. At the maturity date if the trading account has positive value, then the holder receives that value, and if it is negative they pay nothing. This is analogous to an insurance policy on the trading account where the holder enjoys all the profits of the strategy at maturity, but should there be losses then no further cashflow takes place.

An Example

Underlying Asset: BTC/USD perpetual contract

Maturity: 28 June 2019

Trades per day: 10

Maximum position: 10 BTC long or short

Payout at Maturity: max(Account_PnL, 0)

Account_PnL: Marked to market value of the account

Mechanism of trading: the Halo Option holder requests price via GSR and will be quoted a 2 way price for the order size and receive a fill net of exchange trading fees

Premium payable upfront: $16,530 or $1,653 per BTC

About GSR

Founded in 2013, GSR is the original leader in algorithmic digital asset trading. We have traded billions of dollars of digital assets utilizing our proprietary software suite, capable of satisfying all liquidity needs, from basic execution services to highly complex solutions. We have a deep understanding of digital asset liquidity and microstructure, having integrated into over 35 trading venues. Our team leverages decades of experience from Goldman Sachs, Two Sigma, Nomura International, Oracle, Circle and IBM across trading, quantitative investments, and trading technology. GSR’s algorithmic platform has been trusted by many of the top players in the space, including miners, protocols, ICOs, exchanges, custodians, and banks.

If you would like to learn more about this type of structured product, contact markets@gsr.io