Institutional traders are adapting strategies honed in bitcoin options markets to altcoins, according to STS Digital.

Institutional investors are increasingly extending options strategies refined in bitcoin markets to altcoins as they look for more efficient ways to manage volatility and generate yield, digital assets derivatives trader STS Digital told CoinDesk.

According to STS Digital co-founder and CEO Maxime Seiler, techniques long used in bitcoin options — including covered calls, put selling and downside hedging — are now being deployed across a broader range of cryptocurrencies by asset managers, token foundations, venture firms and large holders preparing for liquidity events.

“Many of these strategies were historically confined to bitcoin,” Seiler said. “We’re now seeing institutions and other sophisticated participants apply the same playbook to altcoins.”

Options give buyers the right, but not the obligation, to buy or sell an asset at a predetermined price at a future date. Call options provide upside exposure, while put options protect against declines. Option sellers collect an upfront premium in exchange for assuming that risk, effectively acting as insurers.

In bitcoin markets, institutions have widely used covered call strategies — selling calls above spot prices — to generate additional income on existing holdings. Since the early 2020 market downturn, these strategies have become a cornerstone of institutional positioning, alongside selling puts for yield, buying puts for downside protection and purchasing calls to maintain upside exposure.

STS Digital said the same approaches are now being adopted in altcoin markets, a shift reinforced by recent episodes of market stress. During the Oct. 10 selloff, forced liquidations and auto-deleveraging mechanisms amplified losses across derivatives venues, highlighting the need for more resilient risk management tools.

“Beyond covered calls, institutions are actively using put selling for yield, downside hedging and call buying to capture upside with defined risk,” Seiler said. “Applying these strategies to altcoins helps investors manage exposure without the forced liquidation risk that drove the October crash.”

STS Digital is a regulated digital asset trading firm that acts as a principal dealer for institutional clients, providing liquidity across options, spot markets and structured products tied to more than 400 cryptocurrencies. The firm settles billions of dollars in altcoin options annually through bilateral trades, acting as the counterparty to provide immediate execution.

While centralized platforms such as Deribit dominate options trading in major assets like bitcoin and ether, STS Digital’s broad coverage positions it to meet growing institutional demand for options linked to a wider universe of digital tokens.

Seiler said he expects institutional demand for options tied to bitcoin and altcoins to continue rising as derivatives become the preferred tool for managing digital asset exposure.

“After a year of accelerating adoption, periods of consolidation and lower volatility are increasingly viewed as attractive entry points ahead of the next wave of market catalysts,” he said.