Deribit Review
Is Deribit legit? Our Deribit review is based off of the options and futures trading platforms, mobile app, fees, liquidity, and safety.
Again – we are not endorsing this, but it works and there is no verification process to check that a resident is actually from the country they say they’re from.
If you’ve ever signed up for an account with any other bitcoin exchange, you likely know how annoying it is to have to upload a copy of your passport or photo ID and wait several days before you can buy bitcoin; it’s not always the case, but it’s common with exchanges like Coinbase.
This is one of the things we like most about Deribit – the signup process literally consists of an email verification and takes literally 10 seconds. It is totally anonymous. They don’t even ask for you real name, only an alias!
Once you send bitcoin to your Deribit account, you can trade options and futures within the hour. For me, it took approximately twenty minutes. We greatly appreciate how it easy it is to sign up for an account at Deribit, and the speed at which you can go from having never traded bitcoin options to selling naked put options is a huge bonus.
Options Trading Platform
In terms of the options trading platform, when we first logged into the Deribit platform, we were very impressed with the overall layout.
We love Deribit’s options chain layout. All of the essentials are there. Delta, theta, volume, open interest, etc.
If you’ve traded options on stocks before, you’ll find the Deribit platform intuitive and easy to use.
It’s basically just like an options chain that you’d find for any US stock or ETF.
One feature we hope Deribit will consider installing is a two-factor order confirmation setup for options. When we clicked “buy” or “sell” after clicking on a big or ask price on an option chain, options orders were sent instantaneously. There was no confirmation window that popped up; it is definitely something to be mindful of. For every futures order we placed, however, we were always prompted with a confirmation window.
The lack of options order verification wasn’t really an issue, because we always manually verified our orders, but it does seem like it could increase the possibility of fat finger trade mistakes.
During our regular use of the platform, pricing data loaded quick and we never experienced any lag. Often times when browser-based options chains have to load a lot of data at one time, the data can load very choppy, where part of the chain will be blank for several seconds before finally populating with live data. Deribit’s data loaded seamlessly, which is one of the most important things.
One thing to note about BTC options on Deribit is that they are all denominated in BTC. Essentially, this is like trading Facebook options with Facebook stock, instead of US dollars. This concept is genius.
For example, if you buy 1 $10,000 strike price call option for $64.04, you’re not actually buying it in dollars, you’re buying it in BTC.
This is advantageous for bitcoin bulls, because you’re killing two birds with one stone.
The long calls will appreciate in value as bitcoin rises, and your original purchase of the call option for $64.04 in bitcoin will also appreciate in value! It’s a double whammy, if you will.
On that note, a really useful feature is the BTC to USD conversion underneath all of the individual prices for call and put options. It’s a quick way to tell how much a particular option is worth, as opposed to trying to calculate the USD value of some obscure amount of bitcoin, like 0.00035, in your head.
On the transaction log page, we appreciate how easy it is to tell how much you paid in fees (or received in rebates) for every trade. The fact that this is so easily visible, and not hidden on the fifth page of some hard-to-access account statement, emphasizes how transparent Deribit is with the services they provide.
Moreover, it’s absolutely critical to understand that Deribit is never on the other side of your options or futures order.
Deribit never absorbs client orders or takes the other side of a trade.
Deribit has dedicated third-party market makers that make markets for their options and futures products. This is exactly what the Cboe, the biggest options exchange in America, does for the products it offers options on.
It removes any conflict of interest. Deribit offering an options exchange and an easy-to-use options trading platform would be the same thing as the Cboe offering an options trading platform to access their exchange.
Futures Trading Platform
In regards to futures trading, deribit’s futures trading platform is easy to use and quick to understand. Just like the options platform, if you’ve traded futures before in a brokerage account, you’ll quickly be able to see the familiarities on Deribit’s platform.
One key feature that is very useful on the futures side of Deribit is the potential margin impact calculator. It’s always important to check the potential margin impact of a futures order, because futures offer so much leverage. Deribit makes this extremely easy with real-time buy and sell margins.
Additionally, initial margin and maintenance margin requirements are always visible at the top of the platform. The initial margin requirement is the amount of bitcoin that is required to open (initiate) a position.
The maintenance margin is what’s required to hold the position. If your maintenance margin exceeds the limit, Deribit will begin to slowly liquidate your position until the maintenance margin is back to an acceptable level. Deribit will email you when your initial margin is at a risky level, and they will also email you if your maintenance margin is at a risky level and any liquidation occurs.
When you’re placing a futures order, switching from “CONTRACTS ($10)” to “BTC” doesn’t actually change anything with the value or quantity of your bitcoin futures orders. This feature is simply there to make the pricing easier to understand.
Essentially, by selecting either contracts or BTC, you’re saying I want to buy/sell X amount of futures contracts or I want to buy/sell this X amount of BTC. Deribit does the calculation for you.
Because one futures contract equals $10, if bitcoin is trading at $7,000, 700 futures contracts = 1 bitcoin.
Just like on the options trading layout, the Recent Trades feature is also pretty useful. You can see the price and quantity of previous BTC futures trades on Deribit’s exchange made by other traders.
Mobile App
We like Deribit’s mobile interface. It’s virtually identical as the desktop version, and it offers all of the same functionality.
Sometimes, mobile trading apps don’t offer the same advanced functionality as the desktop version, but Deribit includes everything. For example, it’s possible to send hidden or “iceberg” orders from the mobile app.
These are orders that are limit orders that are live in the market place, but are hidden from other market participants, so they cannot see your order and make a trading decision accordingly.
Is Deribit Safe?
One of the more common questions users have with Deribit is regarding of the security and safety of funds.
Deribit takes the same measures to ensure that your bitcoins will be safe and secure as every other digital wallet or exchange.
According to their website, 90% of the bitcoins Deribit holds at any one point in time are held in cold storage.
This means Deribit stores 90% of client bitcoin balances offline, on a digital drive not connected at all to the Internet. It’s physically impossible for a hacker to remotely access bitcoin keys in cold storage. This is comforting.
Moreover, if Deribit clients were to lose money due to something going awry on Deribit’s end, like a hack or algorithm failure, Deribit’s insurance fund would take care of the losses.
Currently, the fund holds about 26 bitcoins.
Deribit’s Liquidity Risk
It seems the biggest risk when using Deribit is not Deribit being hacked. Rather, the biggest risk you face when using Deribit is, in our opinion, the lack of liquidity. When you go to buy or sell an option on Deribit’s exchange, the liquidity will obviously not be anywhere near as good as buying/selling options on a popular stock like Apple, for example.
Even though Deribit has dedicated full-time market makers, the options spreads, the difference between what an option can be bought and sold for, are still kind of wide. This makes it ore difficult to make money, because sometimes you have to buy high and sell low, or vice versa.
However, the spreads are literally improving every day and have exponentially improved since this same time just six months ago. More traders are hedging, speculating, and reducing cost basis via Deribit’s bitcoin options, and this helps the liquidity.
Simply put, if you want to trade options on bitcoin, your only option is Deribit. The only other exchange offering bitcoin options is LedgerX, and there liquidity is so bad it’s almost not worth mentioning.
Deribits Fees & Commissions
In terms of traditional stock options trading, Deribit has really cheap pricing. In fact, if you provide liquidity for futures or options, you’ll actually receive a rebate.
This is what options exchanges do for professional market markets who make the marketplaces more liquid.
If you place an order to be filled immediately, which is a market order, you will be charged a small fee for your order.
However, if you place an order that provides liquidity, for either futures or options, which is a limit order, you will actually receive a small payment for doing so.
The idea behind Deribit doing this is to incentivize deeper and more liquid markets.
Futures:
Maker Rebate: 0.02%
Taker Fee: 0.05%
Options:
Maker Fee: 0.04% of underlying or 0.0004BTC per option.
Taker Fee: 0.04% of underlying or 0.0004BTC per option.
Fees can never be higher than 20% of the price of the option. For example if an option is traded at 0.0001 BTC, the fee will be 0.00002 BTC (instead of 0.0004 BTC), thus 20% of 0.0001 BTC.
Extra liquidation fees: Liquidations are charged an extra 0.1% fee. Those extra fees are income for the insurance fund.
Deposits: Free – all incoming deposits are free
Withdrawals: Varies – very nominal fee based on the speed at which you want to withdraw your bitcoin
Expiration Exercise/Assignment: Half the fees of taker orders are charged. Eg: 0.025% for Futures, and 0.02% for Options, where for options the fee can never be more than 20% of the value of the option.
Final Thoughts
At the end of the day, Deribit is the only realistic choice to trade bitcoin options. Of course, this was factored into our Deribit review, but the bottom line is this: Deribit offers great tools and pricing on a service that nobody else currently offers. Although you can trade bitcoin futures with brokers like tastyworks, these are not the same bitcoin futures that Deribit offers.
The bitcoin futures that were launched in December of 2017 by the Cboe and CME are regulated futures contracts. This means you need a brokerage account to trade them. Although it’s a popular choice to gain bitcoin exposure, it shouldn’t be confused with Deribit’s futures trading which offers more leverage and technically isn’t regulated.
However, if you own bitcoin, you can sell covered calls and generate income from your passive long bitcoin position, Deribit is basically the only option to do so.
We had a lot of fun selling naked bitcoin put options with Deribit, and we honestly have no complaints. We were able to get in at a fair price, Deribit notified us that our margin impact was getting potentially risky, but not to the point of auto-liquidation, and we were able to bag a winning trade.
There’s no question that bitcoin as an asset is still growing. As such, it’s only reasonable that Deribit is growing along with it. With that said, we actually think Deribit adds a ton of value and creates new opportunities in the crypto world. Bitcoin options are here, and they are here to stay.
