Linear Versus Inverse BTC and ETH Options Settled in Stablecoins
Summary
The document explains the distinction between US dollar stablecoin margined options and crypto margined options for BTC and ETH. In the described linear contracts, margin, premium, payoff, and settlement are denominated in USD or supported stablecoins; the payoff scales with the difference between settlement price and strike. Inverse contracts instead express the payoff and profit or loss in the underlying cryptocurrency, so its dollar value can change with the coin price.
A worked call example illustrates that difference: for a BTC price of $60,000, a $55,000 strike, a $6,000 premium, and a $65,000 expiry price, the stated linear payoff is $10,000 and profit after premium is $4,000. The inverse payoff is expressed in BTC, leaving its dollar value exposed to BTC price changes. The article also describes unified margin across options, perpetuals, and spot. These are venue-specific product details; stablecoin availability varies by region, and the document cautions that stablecoins are not guaranteed to maintain parity with USD.
Key ideas
- Linear options express payoff in dollars or supported stablecoins, while inverse options express it in the underlying cryptocurrency.
- The same BTC price move can produce different units of payoff and different exposure to subsequent coin price changes.
- The worked call example subtracts the premium from the linear payoff to calculate profit at expiry.
- The described account can offset options exposure against perpetual and spot positions through unified margin.
- Stablecoin availability is regional, and stablecoins may not hold a fixed value relative to USD.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.