Cryptocurrency exchange Kraken has started offering bitcoin and ether options trading for eligible investors in the European Economic Area (EEA).

On Oct. 27 local time, blockchain media outlet CryptoSlate reported that users can trade U.S. dollar-settled options through existing derivatives accounts on Kraken Pro. The service is available on both web and mobile.

The launch expands to Europe an options service that began in July for eligible professional and institutional clients. Kraken added options to existing futures accounts so users can manage both products with the same account and collateral.

The products are European-style options that can be exercised only at expiry. They are cash-settled without delivering bitcoin or ether, and the premium, profit and loss, and final settlement amount are all calculated in U.S. dollars. Maturities are offered on a weekly, monthly, quarterly and semiannual basis.

More than 30 assets can be used as collateral for futures and options. Although the products settle in U.S. dollars, collateral does not have to be posted only in dollars. Users can also use collateral already posted for futures trading for options trading.

Margins are calculated using a "portfolio margin" method that assesses the overall risk of held futures and options. This method is applied by default, and required margin falls if profits and losses across positions offset each other.

Options premiums are not paid in full upfront. Under a margin system similar to futures, gains and losses from price moves are reflected in collateral. The options themselves do not incur funding fees, but perpetual futures held in the same account are charged as usual.

Trading is conducted through a request-for-quote, or RFQ, method in which users submit desired terms to receive a quote. Users can request a quote by combining up to 5 positions and decide whether to trade after checking the offered price. Quotes have a validity period, and a trade is confirmed upon acceptance.

The service is limited to eligible users in EEA countries where Kraken provides derivatives. Users must complete an appropriateness assessment that checks knowledge and experience with options before trading. Kraken said it offers the service based on authorisation under the Markets in Financial Instruments Directive (MiFID), and that investment services related to the options are handled by a local entity supervised by the Cyprus Securities and Exchange Commission (CySEC).

It also disclosed the risk of losses from options trading. Buyers can lose the full value of an options position, and sellers can incur losses that far exceed posted margin. In some cases, a seller's losses can be unlimited, and positions can be forcibly liquidated if an account fails to meet margin requirements.

With the expansion, European users can combine futures and options to pursue trading strategies that consider volatility and maturities as well as price direction. Kraken is strengthening its European derivatives business by broadening product choices and using existing accounts and collateral.