OKX, a leading crypto exchange and Web3 technology company, today announced the first report in its series of institutional market analysis entitled ‘How OKX’s Nitro Spreads tool can help institutional investors navigate volatile markets,” finding that bitcoin delivered 98% of its returns for the period on eight total trading days (out of 180) from 1 January to 30 June, 2023 (1H 2023) and underscoring the challenge of timing stable returns.
In addition, and according to implied volatility data for Bitcoin at-the-money options, participants are also expecting bitcoin spot-price volatility to increase in the future. Based on market research and trading data analysis*, OKX also found that factors contributing to price differentials between spot, futures and perpetual swaps – and key drivers for basis trading returns – include market preference on instruments, market sentiment, supply and demand imbalances, market liquidity and interest rate differentials.
OKX Global Chief Commercial Officer Lennix Lai said: “We’re seeing a growing number of institutional traders pursue market-neutral strategies. OKX offers traders a range of tools to realize their strategies and succeed in different market conditions; one such tool is Nitro Spreads, which enables the efficient execution of complex basis trades with just one click.”
The Nitro Spreads market analysis is focused on studying the challenges of long delta trading in the current cryptomarket and outlining how savvy institutional traders can pursue market-neutral strategies in a sideways market. OKX’s institutional research conducted the analysis after reviewing Bitcoin spot price** and derivatives* trading data from 1H 2023.
About Nitro Spreads
Nitro Spreads is one of the only spread trading tools in the crypto market in which the two legs of a trade are executed simultaneously via the orderbook, eliminating leg risk between markets. Traders can use Nitro Spreads, which was made available to OKX’s VIP institutional clients on June 27, 2023, to execute a variety of spread and basis trading strategies via the exchange’s Liquid Marketplace.
The feature also offers the following benefits:
- Lower trading fees for VIP users: Fees for two-leg trades executed simultaneously on Nitro Spreads are 50% lower when compared to executing both legs of a trade individually on a typical orderbook.
- Reduced execution risk: Traders can execute a two-leg basis trade with one click. The spread is clearly defined and guaranteed to be filled in matching quantities for each leg or none at all, thus having zero leg risk and minimized slippage.
- Higher capital efficiency: The initial margin requirement (IMR) to execute spread trading is lower on Nitro Spreads than on a typical orderbook. As the delta risks of the two legs offset each other on Nitro Spreads, traders are no longer required to post IMR for both trades.
Nitro Spreads is currently in the beta phase and is available only to select institutional traders who apply for early access through this link. In the coming weeks, the feature will be available to all of OKX’s institutional clients.
Market-neutral strategies, such as spread trading, can offer a balanced trading approach for stable returns by mitigating risks associated with sudden market movements. Spread trading takes advantage of the price differential (spread) between an asset’s price on different instruments. The two most common types of spread trading strategies are basis and calendar spreads.
In April 2023, OKX announced that its Liquid Marketplace exceeded USD1 billion in trading volume during the first three months of 2023, and as of the end of July 2023, the total trading volume has more than tripled that figure.
*Bitcoin derivatives data, including perpetual funding, implied volatility and term structure data from quantitative derivatives data aggregator and analytics firm Laevitas
**Spot price data from OKX Exchange trading data
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