Xena Exchange is launching XBTVAR — futures on the volatility of Bitcoin (to USD). This is the first exchange-traded volatility contract on the market.
The main advantage XBTVAR offers is the abilvity to get exposure to volatility in one click, without building a complex portfolio of options.
Futures and options on volatility are quite popular on traditional financial markets. For instance, on CBOE the daily trading volume of VIX futures (an index showing the implied volatility of the S&P 500, also known as the “fear index”) has reached 3-5 billion USD.
Xena Exchange’s XBTVAR futures are similar to VA, another type of volatility futures provided by CBOE. In contrast to VIX futures, VA futures’ final settlement price is equal to the realized volatility accrued since the launch of the particular contract. This allows investors to avoid any market manipulations that are unfortunately possible due to the crypto options market’s early (for the time being) stage of development.
On the other hand, while a contract is not expired, its value depends both on implied and realized volatility, making it possible to use the contract for speculative trading operations as well as for hedging option portfolios, broadening the ability of traders to execute complex strategies.
The contracts traded on Xena Exchange are monthly futures, with expiration on the last Friday of each month. The expiration time is aligned with the expiration time of options on the major option trading venues.
The liquidity is provided by professional market makers, including Flowdesk:
“We are more than excited to be partnering with Xena Exchange on this new innovative product. Flowdesk is bringing its expertise in crypto volatility markets to guarantee the tightest spreads and best liquidity in all market conditions”.
The realized volatility is calculated using the daily values of the spot Bitcoin price from three exchanges (Bitstamp, CoinBase Pro and Kraken). Current trading conditions allow users to get exposure up to $1,000 vega. The contract is settled in BTC.