Coin-settled vs tether-settled crypto options

Bitcoin options on Deribit by Coinbase and OKX are priced and paid out in bitcoin. Bybit's are priced and paid in tether (USDT), a dollar token. The strikes can read the same, but the money doesn't, and that changes what a price means and what a gap between two exchanges is worth. It's why the site compares options in implied volatility, and marks a gap against Bybit as not locked in.

What does "priced and settled in the coin" mean?

On Deribit by Coinbase and OKX, a bitcoin option is struck in dollars, and everything else about it is in bitcoin. Its price is in bitcoin, usually a fraction of one, and its value in dollars is that times the forward. At expiry it pays out in bitcoin: what the price settles above the strike for a call, or below it for a put, turned into bitcoin at the settlement price. Ether's options there work the same way, in ether. Options like these are often called inverse. Deribit by Coinbase's Solana and XRP options, though, are priced and settled in USDC, another dollar token.

What is a tether-settled option?

Bybit's options are struck, priced and settled in tether. The strike is a price in tether, the option's price is in tether, and at expiry it pays out in tether, measured on Bybit's own index. Options like these are often called linear: the payout moves one for one with the coin's price, in the token it's paid in.

Why does the same strike cost a different amount?

An option's price depends on the forward, the coin's price for the expiry date, and each exchange works from its own. Deribit by Coinbase's and OKX's forwards are in dollars. Bybit's is in tether, so it sits where tether trades against the dollar. If a tether is worth a little under a dollar, a bitcoin costs a few more tether than dollars, and Bybit's forward is that much higher in number; a strike of the same number is a slightly different strike, too. So a call on Bybit can look a little dearer in plain dollars, and a put a little cheaper, without either being a better price. And a price in bitcoin moves with bitcoin even when nothing about the option has changed.

Why compare them in volatility?

Implied volatility is an option's price with the forward and the money taken out: the yearly volatility the pricing model needs to arrive at the price (implied volatility explained). Each exchange's is worked out from its own forward, in its own money, so the same strike on the same expiry compares straight across, whether it's priced in bitcoin or in tether.

The site shows each price in dollars as well, so you know what you'd pay: a price in the coin at that exchange's forward, tether and USDC at Kraken's rates. The dollars say what changes hands; the volatility says which is dearer.

Why isn't a gap against Bybit locked in?

Deribit by Coinbase and OKX list the same contract, settled in the coin at 08:00 UTC, each on its own index. Bought on one and sold on the other, both held to expiry, the two pay out against each other in the same coin, so what they were apart is what's left, less both taker fees (crypto options arbitrage).

Against Bybit, the two legs don't cancel out:

• Different money. One leg is priced and paid in the coin, the other in tether: at expiry you're left with coins on one side and tether on the other.
• A different index. Each settles on its own exchange's index, Bybit's in tether.
• The coins keep moving. The coins one leg pays out are worth whatever the coin is worth when you sell them; the tether stays the same number of tether.
• Tether can move off the dollar. The dollars a gap is worth take tether to hold at a dollar. If it doesn't, at settlement or after, the gap is worth more or less than it looked: that's the site's "if tether holds".

What is a gap in volatility worth?

Roughly, the points times the option's vega. Vega is how much an option's price moves for one point of volatility, in dollars a coin (vega explained). The site works it out for the option bought, with the same model the exchanges price with, and multiplies it by how far one exchange's bid is above the other's ask, in points:

Example figures, not market data.

Both taker fees come off that, each at its exchange's standard rate, capped at a share of the option's price on a cheap one. What's left is still "≈": roughly what the gap comes to if the two volatilities meet, and only if tether holds.

Coin-settled and tether-settled, side by side

Where to find it

On Bitcoin's and Ethereum's pages, Options priced apart sits under the chain. See every one opens it: the options Deribit by Coinbase and OKX both list, then a line of its own, Against Bybit, in tether. Open that: on a wide screen, Apart, a coin gives each gap with "≈" over its points of volatility, and After fees what's left, over if tether holds. On a narrower one each row is a card, with both exchanges' prices and volatilities. Work it out does the sums for an amount.

The options trade simulator, a card after the chain on every coin's page, walks each exchange's own book for one option and gives the average price in dollars and in the exchange's own money, the coin, USDC or tether, with the volatility it implies. How to read an option chain goes through the chain itself, and the scoreboard ranks the exchanges.

Not financial advice. Prices move while you read them.