How OKX's Nitro Spreads Tool Helps Institutional Investors Navigate Volatile Markets

This is the first part in OKX's research series on Nitro Spreads, enabling institutional investors to implement basis trading strategies with dedicated spread order book liquidity for both legs of a transaction.

Market Backdrop

The cryptocurrency market has captured significant attention from institutional and retail investors alike. Bitcoin, the top-performing asset class this year, boasts an 80% year-to-date return. However, timing the market remains challenging due to extreme volatility—98% of returns stem from just 8 out of 180 trading days.

Volatility Trends

Recent weeks saw a surge in Bitcoin’s implied volatility after a low-volatility period (April–June 2023).
A steepening contango in Bitcoin’s options term structure signals anticipated future volatility.

Key Drivers:

Regulatory uncertainty globally.
Federal Reserve rate decisions.
Growing institutional participation.

👉 Discover how Nitro Spreads mitigates volatility risks

Spread Trading Strategies

Market-neutral strategies like spread trading offer stability amid crypto volatility. Two prevalent approaches:

1. Basis Trading

Exploits price differentials between spot and futures markets.

Mechanics:

Cash-and-carry trade: Buy spot + short futures to profit from basis convergence.
Perpetual swaps: Leverage funding rates for arbitrage (e.g., positive rate = long spot + short perpetual).

Return Drivers:

Instrument preferences (leverage vs. custody).
Market sentiment (contango/backwardation).
Liquidity gaps across exchanges.

2. Calendar Spreads

Simultaneously trade futures contracts with different expirations.

Rollover utility: Seamlessly extend positions.

Institutional Case Study: Starboard Digital Strategies

Starboard Digital Strategies (SDS), an institutional hedge fund, leverages spread trading for uncorrelated, low-volatility returns:

46.6% net return since March 2021.
<0.2% daily volatility with near-zero directional risk.

Key Insight:

"Success in spread trading requires low fees, atomic execution, and accurately gauging market risk appetite."
— Nikolas, Starboard Digital Strategies

👉 Explore institutional-grade trading tools

Nitro Spreads: Optimized for Institutional Traders

OKX’s Nitro Spreads addresses execution risks and capital inefficiencies with:

| Feature | Benefit |
|-----------------------|------------------------------------------|
| 50% lower fees | VIP users save on spread trades. |
| 1-click execution | Eliminates leg risk and slippage. |
| Reduced margin | Offsetting delta lowers IMR requirements. |

Availability: Early access via Liquid Marketplace; full launch 25 July.

FAQs

Q: How does basis trading differ from directional trading?
A: Basis trading is market-neutral, profiting from price gaps between instruments rather than price movements.

Q: What’s the primary risk in spread trading?
A: Execution risk—failing to atomically execute both legs can expose traders to unwanted directional exposure.

Q: Who can access Nitro Spreads?
A: Currently available to select institutional clients; broader access begins 25 July.

Disclaimer: This article is informational and reflects the author’s views, not OKX’s. It is not investment advice. Digital assets are highly volatile; consider your financial position before trading.