There are many types of derivatives, which can be grouped into three. EdaFace Dex offers all the three derivatives, which are:

(1). Options

An options contract is a financial contract that gives the holder the right – but not the obligation – to buy or sell an underlying crypto asset at a specified price by a specified date (expiration date). Thus, options can be used to hedge against the price fluctuations of a digital asset or to trade its future price movements.

For example, if an investor owns EDA and is concerned about potential downside risk in the future, they could buy a put option that allows them to sell EDA at a predetermined price, regardless of its spot price.

This way, they could limit potential losses if the price of EDA falls below the predetermined price.

On the other hand, options can also be used to benefit from the future price movements of a cryptocurrency. In this case, the investor would buy a call option, which gives them the right to buy the underlying asset at a predetermined price if its price rises above the strike price.

(2). Synthetic assets

These are digital representations of various assets designed to provide an accessible way to hold and trade those assets. Synthetic assets are also called “synths.”

They are tokenized derivatives that utilize blockchain technology to replicate their underlying assets’ value and even some characteristics, such as inflation.

The goal of synthetic assets is to leverage blockchain technology’s transparency and openness to allow anyone anywhere to access various assets. They are part of the creation of a permissionless investment environment that is also linked to traditional assets.

Usually, synthetic assets share similarities with stablecoins; however, they are more diverse because they can represent a wide range of assets, including altcoins, stocks, options, futures, and metallic commodities.

Interestingly, while synths attempt to represent the value of the underlying assets closely, they are not directly backed by them.

(3). Futures

Futures represent an agreement (contract) to buy or sell a specific quantity of crypto at a set price on a certain date in the future.

Thus, futures trading is speculative trading, and it is facilitated by exchanges just like spot trading. In the futures market, you are trading contracts that represent the value of a specific cryptocurrency. A futures market settles the delivery of its contracts on a predetermined future date.

If you expect the value of crypto to go up, you will buy a futures contract to go “long,” and if you expect it to fall, you will sell to go “short.” Your profit or loss will depend on the outcome of your prediction.

There are two kinds of Futures that a Dex can offer:

(i). Fixed Futures

These are future contracts with fixed expiration dates.

(ii). Perpetual Futures

These are the most common types of decentralized derivative contracts. They are contracts with no expiration date or settlement.

Perpetual futures contracts are designed to be more flexible and accessible than regular futures contracts.

Note:

EdaFace Dex offers all these three kinds of derivatives. Just like spot markets, futures markets are open 24 hours every day of the year.

Access EdaFace Dex here: https://dex.edaface.com/.

(Please, note button will be activated once EdaFace Dex is in mainnet).

Important Note:

However, your profitability in derivatives trading comes with a sacrifice – to study and know how it operates.

This is the reason why the School of Cryptocurrencies of EdaFace Academy has developed a lot of study materials for your education on derivatives trading.

Visit the School of Cryptocurrencies of EdaFace Academy by clicking here: school.edaface.com.