How We Trade Options
A Closer Look at Our Trading Desk
When you hear “option trading”, what comes to mind?
Most people think of this:
Day trading is markedly different from professional trading. Institutional traders have specific mandates, performance attribution, scope, and risk parameters in their job.
At Fig Investments, we trade options with the following two goals:
To hedge all the structured notes obligations that we have to our customers.
To source and fulfill requests for liquidity of redemption requests.
Let’s dive deeper.
Options & Fixed Income Trading
At Fig Investments, our goal is to help investors get risk managed returns on Bitcoin and Ether using structured option strategies - known as structured notes.
We trade when:
A customer buys a note.
A customer submits a request to redeem a note early.
When we trade, we are obligated to:
Fulfill the order within 30 minutes during Canadian business hours.
If we cannot fulfill the order, then we will cancel (kill) the order and refund the proceeds to our customer without fees.
Circumstances in which we cannot fulfill the order:
Absence of liquidity - we cannot buy or sell at the size to hedge the obligation.
Price moves against a customer’s order price.
Order is placed outside of Canadian business hours.
Where & how do we trade:
US T-bills: we trade US t-bills via our Canadian onshore brokerage.
Bitcoin and Ether options: we trade over-the-counter (OTC) bilateral option contracts1 with market makers such as B2C2.
All orders are placed as limit orders. This means that they can only be fulfilled if the quoted price is better than the order price.
We maintain direct voice channel with all of our counterparties to confirm trades, usually within minutes.
We maintain a diversified set of counterparties to ensure the quotes provided on the option contracts are competitive. We compare quotes provided vs a theoretical price called a “mark price” to ensure the price is reasonable while executable.
After Trade Management & Settlement
After a trade is completed:
We book the structured note on the customer’s account either immediately or within 1-3 business days
Trades are immediately funded, which means USD are immediately sent to the counterparties to settle the delivery of the securities
We reconcile the notes and decomposing instruments on our books vs the cash and instruments that we carry on a daily basis
Safeguard Measures
Customer USD and CAD cash are held at a bank account segregated from Fig Investments’ corporate capital
US t-bills are held at a qualified custodian in Canada, segregated from company’s own brokerage account
We do not engage in proprietary trading of customer’s funds and securities. This means we will not be buying or selling the US t-bill and the option contracts without customer knowing
Fig Investments’ corporate entity, Volatility Labs Inc, maintains regulatory capital to cover for the unlikely scenario of loss of note’s principal
We continuously fundraise from private equity and venture capital markets to fund our operations and ensure stability of operations.
To Learn More
Please visit us at https://fig.investments.
Since launching about 2 months ago, we are very grateful for the support of our customers. Please subscribe to keep updated on our developments. Alternatively feel free to email gm@fig.investments for all your questions.
Disclaimer: The information provided in this blog post is for educational and informational purposes only and is not intended as financial advice. The content is not meant to provide, and should not be relied upon for investment, accounting, legal, or tax advice. You should consult your own financial, legal, tax, or other professional advisors before engaging in any transaction. The views expressed on this blog are the author's own and do not necessarily reflect the views of any financial institutions or other entities. Investing in financial markets involves risks, and there is always the potential of losing money when you invest in securities. Past performance is not indicative of future results.
The option contracts that we are allowed to trade are governed under the ISDA master trading agreement.