Types of Contracts Offered:

Platforms on the CVEX Protocol can provide a variety of derivatives contracts, including futures, options, and perpetual, each designed for leveraged trading, whether for speculation or hedging:

  • Futures Contracts: These are binding agreements obligating the buyer or seller to trade a specific asset at a predetermined price on a future date. They allow traders to speculate on the future price of assets or hedge against potential price movements. Futures contracts involve frequent mark-to-market and margin adjustments to reflect price changes.

  • Options Contracts: These contracts grant the holder the right, but not the obligation, to buy (call) or sell (put) an underlying asset at a set price (strike). In options trading on CVEX, the premium prices are determined by market dynamics through an order book.

  • Perpetual Contracts: Without expiration dates, these contracts allow indefinite holding of positions. Margined in USDC, perpetual involves regular mark-to-market adjustments. They include a funding mechanism based on interest rates, paid regularly to align spot and contract prices.

Futures and Options Contracts are cash-settled to the index price of the corresponding asset at the time of settlement. This puts the holders in the same position at expiry as they would be today vis-a-vis the underlying asset.

Trading and Margin Process

Employing conventional order book trading with an on-chain matching engine, the protocol offers enhanced transparency and efficient market price discovery. CVEX trading allows for leverage across all contracts, enabling traders to manage large positions with relatively small capital. Additionally, CVEX supports cross-margining across all positions within the same platform, enhancing capital efficiency for traders. All contracts on CVEX are USDC-margined, meaning both the margin and the settlement of gains or losses are paid in USDC. This standardisation simplifies the margin process and reduces currency risk.

Risk Management on CVEX

The CVEX protocol employs advanced risk management techniques, including a Value-at-Risk (VaR) model to manage risk exposure. This model considers the cross-correlation of traders' positions and dynamically adjusts to volatility changes. The protocol also utilises automatic margin calls as a comprehensive risk management strategy.

It is designed to support contracts with diverse underlying assets, such as cryptocurrencies, commodities, and stocks. Introducing a new contract merely requires providing reliable Prices and Risk oracles for the underlying asset. A distinctive feature of CVEX is its cross-margin trading capability, seamlessly integrating cryptocurrencies with traditional financial instruments and offering traders expanded opportunities and improved capital efficiency.

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