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OKEX Derivatives Review: Complete Exchange Overview

OKEX is a large cryptocurrency exchange established in 2016. They have recently moved onto the crypto derivatives market in a big way.

Using their expertise in the spot market, OKEX offers their users the opportunity to trade Futures, perpetual swaps and options markets. Each of which gives traders a unique way to trade and hedge the crypto markets.

So, is it worth considering?

In this OKEX derivative review, we will attempt to answer that. I will also give you some top tips that you need to know when using the platform.

OKEX Overview

OKEX was originally founded in Hong Kong in 2016 but in 2018 they moved to Valletta in Malta. This was no doubt in response to the favourable crypto regulations in that country.

The original exchange was a spot crypto trading exchange that has expanded rapidly since its launch. It is available in over 100 countries and the BTC futures trading on OKEX recently surpassed $1.5bn per day in daily trading volume.

These derivative instruments on OKEX are the ones that we will be reviewing. These include their plain vanilla futures, their perpetual swaps and their options. This means that they are well positioned to compete with a number of global exchanges.

In order to cater to their large community of traders around the world, they have translated their site into 11 different languages and includes English, Russian, Chinese etc.

Although OKEX derivatives is available in over a 100 countries, there are a number of regions where they do not offer their services. These include the likes of the United States, Hong Kong and a list of other regions. You can see the full list in their Terms of Service.

Is OKEX Safe?

For any crypto trader, this is one of the most important considerations. We know all too well the risks that could come from centralised exchanges.

OkEX Overview. Image via OKEX

When we look at exchanges, there are a number of factors that we look to in order to determine how safe they are for their traders.

Let’s take a look at these shall we?

Exchange Security

OKEX operates a secure hot and cold wallet security procedure. This means that the bulk of their funds are stored offline in a cold environment. This means that it is protected from hackers.

Then, they keep a limited proportion of their coins on their servers in a “hot” environment to meet demand for withdrawals / deposits.

When it comes to exchange infrastructure, they operate GSLB (Global Server Load Balancing). This means that they have a number of servers around the world in order to ensure server uptime and manage trading demand.

Risk Management

Given that OKEX derivatives operates a leveraged trading platform, they have to have measures in place in order to reduce the risk posed by market movements to the trading pool.

Okex Insurance
Balances at OKEX Insurance Fund

The OKEX insurance fund is run in order to be a backstop for all those trades that cannot be liquidated above the bankruptcy price. The fund is replenished with the initial margin that liquidated traders have at the outset of their trade.

Communication Security

OKEX has fully encrypted communications which means that when you send them information, it is sent in a secure manner. This includes all personal documentation and passwords.

This is also helpful as it will help you identify whether you are on a phishing site. If you cannot see the padlock in the browser or the SSL certificate then that will mean that you are not on the correct site and you should leave immediately.

User Security

In general, the best security starts with the trader. That is why OKEX have provided a number of tools in order to help users secure their accounts.

Perhaps one of the most important of these is two factor authentication via the use of a phone. There are two options to do this. The first is to use an SMS authentication and the other is to use the Google authenticator.

2FA Authentication OkEX
Activating the 2FA Authentication on OKEX

I would advise against the SMS authentication as this opens you up to sim swapping attacks. Hence, you can set up the Google authenticator by downloading it in the app store and binding it to the OKEX server.

Another pretty neat tool that they have at OKEX is their anti-phishing tool. This is basically a code that is sent in every single email that they send you. If you do not recognize the code then you know that the email came from an illegitimate sender.

Derivative Instruments & Leverage

So, what are derivative instruments? Well, they are an instrument that you can trade that “derive” their value from the price of some underlying instrument. In this case they are cryptocurrencies.

Derivative instruments are leveraged which means that you can magnify your gains / losses by a factor of many times. At OKEX, this can be up to 100x depending on the instrument that you are trading.

So, for example, if you have a trade that has leverage of 50X it means that for a $1 move in the price of the underlying asset, your position will move by $50.

Now, let’s take a closer look at the derivative instruments that they have on offer at OKEX.

Futures

Futures are instruments whereby you agree to buy or sell some asset in the future at some predetermined time. These futures contracts are an obligation to buy / sell which makes them differ from options.

2FA Authentication OkEX
Payoff Diagram of a Long and Short Future Instrument

On OKEX derivatives, they have futures instruments on a 9 assets and these are the following: Bitcoin, Litecoin, Etheruem, Ethereum Classic, Ripple, EOS, Bitcoin Cash, BSV and TRX. So, a pretty reasonable list.

These futures instruments have leverage of up to 100x and they have expiries which are weekly, bi-weekly, Quarterly and Bi-quarterly. These contracts are settled every day at 8am UTC.

You can also elect to get your positions margined with either coins (crypto) or Tether (USDT). This will determine where the margin will come from.

Finally, when it comes to futures, you can elect to cross margin your futures account. This means that margin can come from anyone of your accounts at OKEX.

Perpetual Swap

OKEX terms these instruments at Perpetual Swaps but they are sometimes called perpetual futures on other exchanges. You can basically think about them as a traditional future except there is no expiry time.

With a perpetual future, you can hold a position without any time limit and withdraw your realized profits anytime. For those of you who trade CFDs or spread betting instruments, a perpetual swap has the same payout profile.

The reason that it is called a “Swap” is because you are swapping the returns for one asset for another. In this case it is a cryptocurrency vs. the US dollar. Given that you are doing this, you will have to pay a funding rate.

What is a funding rate?

It is used to make sure that the perpetual swap price is anchored to the spot market. When the funding rate is positive longs pay shorts, when it’s negative shorts pay longs. It’s not charged by the exchange, but the fee between longs and shorts.

OKEX Funding Rate
How The Funding Rate is Calculated

As is the case with the futures instruments, you have a 100x max leverage and you can choose to margin your position either with coins or with Tether. Also, settlement on the perpetual swap occurs every 24 hours.

When it comes to asset coverage, you can trade up to 12 different assets. These include all of those that you can trade with the futures above as well as the addition of NEO, LINK and DASH.

Options

Options are derivative instruments that give the holder the right but not the obligation to buy or sell some asset in the future at some predetermined time. They are asymetric payoff instruments.

We have an extensive guide on cryptocurrency options which you can read if you want more information. But the key thing to note is that when you buy an option, you have a limited downside risk and an unlimited upside potential. This can be the opposite if you sell an option.

CALL & PUT Option
Payoff of a CALL option and a PUT option

There are CALL options which give you the right to buy and then there are PUT options which give you the right to sell some asset. When buying an option, you are paying a premium to the counterparty as well as some trading fees to OKEX derivatives. There is no margin required.

However, if you wanted to sell an option then this could be done but you would have to request it specially. They will require a minimum balance in your account in order to cover for the event the position moves significantly away from you.

On OKEX, there is currently only one asset that you can trade Options on and that is Bitcoin. When we checked into the platform there were four option expiry times.

OKEX Derivative Fees

When it comes to your trading profitability, one of the most important considerations is the trading fees at the exchange.

So, how does OKEX stand here?

Well, they appear to be quite reasonable across the board. Trading fees will differ according to what trading tier you are, what the instrument is and how much OKB tokens you hold in your account.

OKEX derivatives also operates a Maker / Taker Fee model. For those who are new to the term, it is when you have different trading fees depending on whether you are making or taking liquidity off the books.

Let’s take a look at the fees per instrument shall we?

Futures

There are two types of users that have different fee schedules. These are your normal user and your VIP user. Normal users are those that have a 30 day trading volume that is below 10,000 BTC.

Within the normal user tiers you have 5 different levels. These are determined according to the amount of OKB tokens that you hold. Then, within the VIP tier you have different levels which are determined according to 30 day trading volume.

OKEX Futures Fee Schedule
Fee Schedule From OKEX Futures

So, from the above you can see that those market makers will get a rebate if they are able to generate over 100k in BTC trading volume on a 30 day rolling basis. These fees are about in line with those of other leveraged trading platforms like ByBit etc.

Perpetual Swaps

Perpetual swaps have about the same fees as that of normal Futures. However, in order to reach the VIP level you have to be trading only a minimum of 5,000 BTC.

The only difference in trading fees for the perpetual swaps comes in when you are a VIP and you have slightly higher taker fees and slightly higher rebates for the makers. I encourage you to check out the levels over here.

Something else that you will have to consider when you are trading a perpetual swap is that you will have a funding rate. This is not a fee but instead reflects the differential between the funding rate on the cryptocurrency and USD.

The funding rate can either be positive or negative and it is arranged every 8 hours. If you close your position prior to the funding exchange then you will not pay or receive funding. The funding rate is a dynamic number that will change to reflect market conditions.

Options

Just like with the perpetual swaps, the normal users will have similar fees when trading options. However, the level to reach the VIP tier is much lower at only 1,000 BTC.

However, when it comes to these VIP users, the you will have exactly the same trading fees for the different levels. You can see more about the option fees over here.

OKEX Registration

Ok, so you are ready to try out OKEX? Then you will need to create an account. When you are on the website you can hit “Sign Up” and you can either head over your email address or sign up with a phone number.

OKEX Registration
OKEX Registration Process

Once you have signed up they will send you a code that you will need to use in order to confirm your registration. After you hand this over you can begin. They will ask you whether you would like to buy crypto or whether you are going to be sending in.

Warning ⚠️: Once you have finally set up your account I would suggest that the first thing that you do is confirm your 2FA.

Verification & KYC

While OKEX derivatives does allow you to keep your account unverified, you have pretty strict limits on it. Unlike with other exchanges such as Binance that allow unverified account withdrawals, OKEX needs basic verification for the first level.

OKEX Verification
Tiers of Verification at OKEX

However, in order to complete the first level of verification, all you need is an ID number, name, surname and place of residence. Once you have given this information over then you will be verified almost instantaneously.

If you would like to move onto level 2 verification to increase your trading and withdrawal limits then you will need to upload copies of your ID document. You will also need to take some selfies of yourself in order to confirm.

This is all done through the use of Net Verify which is a third party KYC service.

Deposits / Withdrawals

Once your account is set up you will need to fund your account. There are a number of ways to do this. These include through fiat currency as well as crypto.

If you are buying with Fiat then OKEX uses a number of third party services. These include the likes of Koinal, Simplex & Others. If you are using a bank wire then you can use Banxa which offers SEPA and SWIFT banking services.

Payment Methods OKEX
Some Payment Methods at OKEX

If you already have crypto and you want to deposit, then you will have to generate an address. This can be done in your “Assets” section of your account admin. You will select the applicable token which will generate a deposit address.

Once you have sent your funds over then you will have to only wait for one confirmation before it will be credited. If you would like to track your deposit then you can use a blockchain explorer.

Note 📝: When you have funded your account then you will need to move that over to your futures account

Withdrawals

If you wanted to withdraw your funds then you will have to double check your withdrawal limits. These will depend on not only your tier but also how much verification you have completed.

Withdrawals are done in the same panel as your deposits. Before you withdraw you will have to set up a funds transfer. This is basically password that will allow you to confirm any withdrawals out of your account.

Warning ⚠️: When setting up your withdrawal password, be sure to use a different one from your login

Once you have set up your withdrawal password, you can go ahead and place your withdrawal amount as well as your offline address. Once you have made the request they will process it and you can monitor it on the blockchain.

OKEX Futures Platform

It’s time to move onto the belly of the beast and examine their trading technology and platforms. While they all use the same user interface, they differ in terms of the functionality on the platform.

If you want to trade futures, then you will first have to activate your futures account. In order to do this you need to complete a few questions to make sure that you are familiar with futures trading.

This is actually the first time that we have seen this being included on a Futures trading platform and it is no doubt a wise decision by OKEX. The questions are not that complex and can easily be answered if you have a basic understanding of futures trading.

Once you are done setting up your futures trading account then you can begin trading. This is of course assuming that you have already moved funds over as mentioned above.

The UI of the trading platform is fairly intuitive. On the left you have all of the markets that you can trade. At the top you can select the time to expiry as well as what currency you would like the funds to be margined in.

OKEX User Interface
OKEX Futures User Interface

Just below that you have your options in terms of leverage and how you would like your account to be margined. Just below that you have your order forms, charts and historical order book.

Pro Tip 💯: You can expand the chart out to full screen and use it to conduct all of your technical analsysis.

If you expand out the chart then you will notice that you have two options in order to trade with. One is the default chart offered by OKEX and the other is the Tradingview chart. For those who know trading view, it is one of the most well know third party charting packages on the market well liked by technical analysts.

Then, just below the charts you have the historical & live order section. This will list all of the orders that you have running at OKEX as well as your Unrealized PnL.

Then, to the left of this you have some really useful additional info. For example, you can check out the index prices and mark prices. Remember, that the mark price is the one that is used to settle the derivative instruments whereas the index price is the one that is referenced to formulate the mark price.

For the Night Owls 🦉: You can switch the trading interface and make it a dark theme

Something that I really found quite useful was their Trading Data tab. This gives you everything that you need to know about what is going on in the OKEX futures market. This includes:

  • Long Short Ratio: The ratio of longs and shorts in the market
  • BTC Basis: This is the difference between the future or swap price and the spot price.
  • Swap Funding Rate: Estimated fee rate on the perpetual swap.
  • Top Trader Sentiment Index: Percentage of Longs / Shorts held by the top 100 traders

Margin

The first thing you should note is that the max margin of 100x will depend to a large degree on the the size of the position that you currently hold.

If you pop on over to the position tiers guide you will see that the 100x leverage (or 1% margin) only applies to those positions that are less than 3,000 contracts. As you take on more contracts then your leverage factor will start to decrease. This is because of an increase in the initial margins as well as the maintenance margin.

Position Tiers OKEX
Position Tier Guidance at OKEX

Then, when it comes to how this is margined from your account, you can either elect to have it margined in crypto (Coin margin) or margined in Tether.

Finally, you have the option to cross margin. This basically means that margin will be drawn from not only your futures account where the funds are but also from the other accounts where you have funds. We would advise against this though.

Perpetual Swap

If you want to trade perpetual swaps, it has much of the same UI as the Futures instruments. The only difference being of course that you can’t change the expiry time.

Another thing that you should observe is the funding rate. This is dynamic and constantly changing so be sure to monitor it before you place your trades.

You will also want to take a bit of a closer look into the position tier guides and how that will impact the margin requirement. They are slightly different for the higher tier limits than with Futures.

Options Platform

When it comes to the options platform, the layout is similar although the functionality is quite different.

There are a number of ways in which you can buy an option. Perhaps the most user friendly way is to use the options Discovery tool. This allows you to hone in on the ideal option for your trading conditions.

Using the Options Discovery tool will also draw you out a neat payoff diagram where you can see the profit / loss that will incur for said option. Once you are OK with the set parameters then it will take you to the market for the said option.

Options Trading OKEX
Options Trading Functionality at OKEX

However, if you want to take a look at the broader market then you can go to “All Options”. This UI is similar to that of the likes of Deribit for those of you who have used that exchange. You will see an overview of all of the PUTs and CALLs as well as the different expiries.

Note 📝: Those options that are out-of-the-money are much less liquid than those closer to the money.

Once you have selected the option that you want to trade, either through option discovery or All Options, then you will have a similar trading interface to the Futures and Swaps.

Something that you should note, however, is that you only have one order type that you can take out on the option. This is a Limit order. You don’t need to place any stops however as you know that your downside is limited.

Finally, at the top of the charts there is a dropdown where you can observe the “Greeks” of the options. These are basically the factors that determine the option price sensitivity. We won’t go into the specifics of the Greeks here but Guy did a complete video on that.

Order Forms

I wanted to go over the order forms separately as these are quite comprehensive and you have a lot of functionality here.

This is more the case with the futures and swaps than it is with the options. Below is your typical order form for the swap / future. As you will see, you can either open or close your orders with opposing types.

Order Forms & Types
Order Forms & Order Types

For these orders, you have 6 different order types. This is much more than we have seen at other exchanges and gives the trader that many more tools to work with. The order types are:

  • Limit Order: These orders are good till cancelled. They are simply orders that are placed at some predefined level
  • Advanced Limit: This is a standard limit order where you have more functionality around how you would like the order to be executed. For example, it could be Post Only, Fill-or-Kill or Immediate or Cancel. “Post Only” is a standard order. Fill or Kill will execute the entirety of the order or kill it. Immediate or Cancel will execute it now at the best price or cancel
  • Stop Limit: This is an order that will be placed only once a certain trigger price is met. Once the trigger price is met a standard limit order is placed.
  • Trail Order: With this order, a limit order will be placed once the price has retraced after breaking a certain trigger level. This is called the “Callback Rate”
  • IceBerg Order: This is an order that allows a trader to place a large order without incurring too much slippage. This order automatically breaks up a user´s large order into multiple smaller orders
  • Time-weighted average price (TWAP): TWAP is the average price of the order over a specified period of time. It is basically a strategy that will attempt to execute an order which trades in slices of order quantity at regular intervals such that the fill price equals the TWAP price.

If you are struggling with any of these order types then you can always check out the OKEX derivative docs. They go over them in quite a lot of detail.

OKEX Mobile App & PC Client

For those of you who are on the go, you may need to monitor your positions from a mobile device. That is why OKEX have developed their own trading application.

This app allows the trading on all markets at OKEX including not only their futures markets but also their spot markets and margin trading. It is safe, transparent and comprehensive.

You also have interactive charts which means that you can still complete some of your more in-depth analysis while you are at your desk. You also have one touch ordering which could make it a lot easier to execute your trades.

The App is available on both iOS and Android and is listed in the respective stores. If you want to get a sense of what people think about it then you can check out the reviews. They seem to be quite positive for everyone. For the few complaints that were there, the OKEX team was quick to follow up which is a great thing.

OKEX App Ratings
OKEX Mobile App Ratings. Source: iTunes & Google Play

So, should you use their mobile app?

Well, I must admit that I personally am not one of the biggest fans of mobile trading in general. This is just because you cannot properly chart the trendlines or set up multiple trading parameters. I will always opt for the web or PC based version.

And, speaking of PC clients, OKEX has developed a program that is available on both Mac & PC clients. This is just as functional as the web based trading platform although it is likely to be a bit faster.

OKEX API

For those of you who like to code trading algorithms, you will be happy to know that OKEX has a pretty robust API with a number of endpoints. They have both a REST as well as a WebSocket version.

If you do want to run a bot connected to their API then you should make sure that your IP address is outside of Mainland China. It is also suggested that you use the Ali Cloud server that is in a Hong Kong datacenter.

There are also an extensive list of SDKs which would allow you to develop bots and trading algorithms in a programming language that you know. These include the likes of Java, node, Python, C++, Go, C#. There are extensive docs which you can check out here.

If you want to use the API you will need an API key. You can get this in your account area by heading over to your username and then hitting “API”. Here you will select “My API” where you will be able to create your own key with the following parameters.

OKEX Key Generation
API Key Generation Parameters at OKEX

Note that the “Link API” is if you would like to bound the API key to a certain IP address. This would mean that only this IP could send commands to the API. Once you have created your key you can place it in your code in order to start trading.

Warning ⚠️: Although there are certain bot services that are offered online, we would discourage giving them your API key. Many of these are illegitimate and use your trading account for illegitimate means.

Customer Support

This is one of those really important things for me. We are all well aware of the frustrations of waiting forever to get a response from an exchange on our queries.

Thankfully, with OKEX you have a pretty strong support function that they are able to help the derivative traders with. There are a vast amount of resources and touchpoints that you can utilize at the main exchange.

Okex Support
Reaching out to Live Chat

Perhaps one of the quickest ways to get hold of an agent is through their live chat function. Either they will have an agent who is available to speak to you live or they will email back in response to your query.

Although live chat is the most convenient option, sending a support ticket is also an option. This is perhaps if you want to ensure that your query gets routed to the most appropriate department.

Pro Tip ✅: If you would like to chase up your support ticket then you can hit them up on their Telegram, Reddit or WeChat.

You will also notice that OKEX has a support number that you can call. This is not something that is generally offered at crypto exchanges so it is a great thing to see.

Of course, there is no need for you to reach out if you can find the required information in their support centre. They have most of the answers that other users have posed and it is indeed quite comprehensive.

OKEX Community & Academy

Something that we really liked about OKEX is that they have a pretty strong community around it with numerous telegram & Facebook groups. This is a great way for you to bounce some trading ideas off fellow local traders.

OKEX has also provided a plethora of educational resources for you to take advantage of. This has got everything that you need to know from simple trading guides to more advanced resources such as how to trade options and futures as well as bespoke trading strategies.

These are both written resources as well as video content. They are well produced and the presenter is both knowledgeable and articulate.

Finally, there is also a pretty handy glossary where you can learn about a whole host of terms and information. This could be ideal in case you are unfamiliar with certain terms on the platform.

Conclusion

In summary then, we really liked the OKEX derivative platforms. Not only does it have the advantage of being backed by one of the largest trading platforms in the world, but it is also really well designed.

The futures and swaps give you a great deal of nationality not just when it comes to assets to trade but also order functionality and data analytics tools. OKEX has designed platforms that are not only highly functional but also really easy to use. This is best illustrated with their options instruments.

There are of course, areas for improvement. For example, you only have Bitcoin options to trade at the moment. There is also relatively limited liquidity for the options market especially those that are out-of-the-money.

It is our hope that as more traders start to use the exchange, the liquidity should follow and hence make it easier for you to place large orders for your options.

So, is the OKEX derivative platform worth using?

Well, if you want a highly functional yet simplistic trading interface developed by a well respected global exchange, then it is well worth a spin.

Warning ⚡️: Trading leveraged futures products is incredibly risky. Make sure that you practice adequate risk management

The post OKEX Derivatives Review: Complete Exchange Overview appeared first on Coin Bureau.

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