Popular trading platform LedgerX has recently launched a new savings product for Bitcoin (BTC). The product is licensed by the CFTC (US Commodities Future Trading Commission) and certified by a CFTC derivatives clearing organization (DCO) license and a swap execution facility license (SEF).
LedgerX COO Juthica Chou noted how both licenses together help offer additional services to customers in a “vertically integrated” way.
The advantage of having both licenses means investors can earn a definitive, fiat-based yield on their Bitcoin, as opposed to just “HODLing” and hoping for an appreciation. This is achieved by an investor selling a call option on deposited BTC at a longer date than usual with a higher strike call option. The method is known as a ‘call overwrite technique’.
The intention behind the design is to make BTC option trading simpler for bull traders who are less experienced in the market. It reduces the complexity of the trade mechanism to a basic point-and-click interface and increases a traders chances of getting a premium price on their assets. Users are given the opportunity to not only choose the number of BTC they wish to earn a yield on, but also the implied rate that they anticipate to earn.
Chou pointed out that the system is aimed at long BTC holders:
This interface will definitely be skewed to the long Bitcoin holders, who will likely only deposit bitcoin and who will want to earn interest off of that Bitcoin.”
Forbes reports that in the past three months, approximately 70 percent of LedgerX’s trade volume has derived from options and exhibit an average trade size of $60k. LedgerX will charge a transaction fee for these services and the contracts will be available for durations of three-months and six-months.
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