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How Does Counterparty Risk in Derivatives Trading Differ from Spot Trading in a CLOB?

Derivatives have future obligations, creating long-term counterparty default risk unlike spot trades.

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In What Ways Do the Unique Contract Terms of Derivatives Pose a Challenge for CLOB Systems?

A CLOB requires fungible assets; unique derivative terms prevent standardized, price-based matching.

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What Are the Primary Alternatives to a CLOB for Trading Complex Derivatives?

Alternatives to CLOBs are Request for Quote (RFQ) systems and direct over-the-counter (OTC) negotiation.

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How Does Low Liquidity in Complex Derivatives Impact the Effectiveness of a Central Limit Order Book?

Low liquidity in a CLOB leads to wide spreads, high slippage, and unreliable price discovery.

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▴Implied Volatility Crypto

▴Crypto Option Expirations

▴Skew Term Structure

What Is a ‘Volatility Skew’ in Options Pricing?

Volatility skew is the pattern where options with the same expiration but different strike prices have varying implied volatilities.

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▴In the Money Options

▴Option Expiration Probability

▴Financial Derivatives Trading

How Does ‘Delta’ Relate to the Probability of an Option Expiring ITM?

Delta serves as a rough approximation of the probability that an option will expire in-the-money (ITM).

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▴Protective Put Options

▴Crypto Asset Protection

▴Asset Price Floor

How Are Options Used for Hedging a Cryptocurrency Portfolio?

Buying put options on a cryptocurrency hedges a portfolio by setting a minimum sale price, protecting against downside risk.

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▴Understanding Option Greeks

▴Volatility Impact on Time Value

▴Time Value Erosion