Present-Value and Forward-Based Quotes for Crypto Options
Summary
The article explains why crypto option prices can be shown using either spot or forward values. It describes the cash-and-carry basis as a delta-neutral position whose returns reflect stablecoin financing yields, and argues that these yields influence the opportunity cost of funding an option premium. A soda purchase example illustrates how paying now for future consumption differs from paying later, even if the nominal price is unchanged.
For options, a premium paid immediately and a payout received at expiry occur at different times. Comparing them requires either discounting the future payout to present value or carrying the premium forward. The article characterizes Deribit’s USD display as forward or future-value based, in contrast with the present-value convention it says is common in traditional markets. Its author ultimately favors present-value quotes because participants have different funding costs and may trade or hedge before expiry. The discussion is conceptual: it does not quantify a universal discount rate, and it notes that lending yields include counterparty risk and are only an estimate of financing cost.
Key ideas
- Cash-and-carry forward prices can reflect the yield available from stablecoin lending.
- Option premium and expiry payout occur at different times, so comparisons should account for financing or discounting.
- Forward-based and present-value quotes express option values using different timing conventions.
- The author favors present-value quotes because funding costs vary among market participants and strategies.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.