The decentralized exchange Aevo, a core product from the structured finance protocol Ribbon Finance, has officially launched options trading for a variety of prominent alternative cryptocurrencies (altcoins). This expansion allows traders to access options contracts for assets like LDO, PEPE, SUI, ARB, LTC, and APT directly on-chain—a capability that was previously only available through over-the-counter (OTC) desks.
What Are Crypto Options and How Do They Work?
Options are derivative contracts that provide traders the right, but not the obligation, to buy or sell an underlying asset at a predetermined price (the strike price) on or before a specific expiration date.
- A call option gives the holder the right to buy the asset.
- A put option gives the holder the right to sell the asset.
These instruments are widely used for hedging against market volatility or speculating on future price movements without owning the actual asset.
Expanding Trading Opportunities for Altcoin Traders
With this new offering, Aevo enables market participants to trade options on a selection of popular altcoins, thereby broadening the scope of decentralized finance (DeFi) trading strategies. Users can select their preferred strike price and contract duration, receiving instant quotes from established crypto market makers including Galaxy, GSR, and OrBit Markets.
This initiative is particularly significant for traders focused on mid-cap and small-cap cryptocurrencies, who can now employ advanced strategies such as:
- Spreads
- Combination strategies involving spot, futures, and options
- Hedging around major fundamental events (e.g., Litecoin halving)
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The Competitive Landscape of Crypto Options
Until now, the centralized exchange Deribit has dominated the crypto options market, with most activity concentrated in Bitcoin (BTC), Ethereum (ETH), and Solana (SOL). Aevo’s move introduces a fully on-chain alternative that supports a wider array of digital assets, enhancing accessibility and flexibility for decentralized traders.
Currently, Aevo supports buying options, which can be held until expiration or closed early. Future developments are planned to allow users to write (sell) options with customized margin requirements and chosen counterparties.
Capital Efficiency and Risk Management
A key feature highlighted by market makers is Aevo’s portfolio margin system. This mechanism improves capital efficiency by offsetting profitable and losing positions within a portfolio to determine real-time margin requirements. According to OrBit Markets, this is a major innovation for on-chain options trading.
Julian Koh, CEO of Ribbon Finance, noted that market makers are required to post collateral—around 30% of the notional trade size—in USDC, a dollar-pegged stablecoin. This helps ensure solvency and reduce counterparty risk.
Aevo and Ribbon Finance: A Brief Background
Ribbon Finance first gained traction in 2021 by offering structured products that delivered double-digit yields, appealing to retail investors seeking alternatives to traditional arbitrage strategies. The protocol later launched Aevo in 2022, initially focusing on Ethereum options trading. The introduction of altcoin options marks a new chapter in its effort to make sophisticated derivatives accessible on-chain.
Frequently Asked Questions
What is Aevo?
Aevo is a decentralized exchange built by Ribbon Finance that specializes in options and perpetual futures trading. It operates on Ethereum and focuses on providing advanced financial products in a decentralized manner.
Which altcoins are supported for options trading on Aevo?
Initially, Aevo supports options on LDO, PEPE, SUI, ARB, LTC, APT, and several other altcoins. The platform may expand this list based on market demand and liquidity.
How does on-chain options trading differ from OTC?
On-chain trading offers greater transparency, reduced counterparty risk, and instant settlement via smart contracts. OTC desks often involve individualized agreements and may lack the same level of price visibility.
Can users write options on Aevo?
Not yet. Currently, users can only purchase options. However, Aevo has announced plans to allow users to write options in the future with flexible margin options.
What is portfolio margin?
Portfolio margin is a risk-based margin methodology that calculates margin requirements based on the overall risk of a portfolio rather than on a position-by-position basis. This can lead to better capital efficiency.
Is Aevo suitable for beginner traders?
While Aevo offers powerful tools, options trading involves significant risk. It’s recommended for users who have a solid understanding of derivatives and decentralized finance.