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In February, we noted that centralized options exchanges, particularly Deribit, saw a massive increase in usage in 2025. This trend is now starting to work its way into DeFi, as the space gains mindshare and legitimacy in institutional finance.

One of the emerging leaders in the space is Derive, formerly known as Lyra, which has been consistently building its DeFi options platform since 2021. While Derive offers perps, spot, and options, this article will focus on options, which is the platform’s fastest-growing offering.

Unlike many DeFi option platforms, Derive offers comprehensive option markets where users have a large selection of expiration dates and strike prices to choose from. The platform currently offers markets on major assets including BTC, ETH, SOL, and HYPE. Derive’s recent success is a product of years of hard work, and over 20 teams are now building on top of their infrastructure to host their own option products.

In this article, we’ll explore the utility of options, how the crypto options space is being fueled by the expanding institutional presence within DeFi, and how Derive is perfectly positioned to capitalize on this trend.

In markets, it pays to be specific; expressing a more nuanced view through derivatives frequently creates a larger payoff opportunity than simply going long or short the underlying. This is where options’ utility shines.

Options have the unique ability to offer customized payoff structures – they’re equally useful for yield generation, hedging, and speculation.

To explore how options can be used to manage a speculative position, let’s say you expect BTC to reach $90K by May 29th (the last May expiration date available on Derive), and you want to create a position to express this view while risking less than $2,500. 

Without derivatives, you can simply buy BTC to get exposure, and you’ll make money if it increases from your buy price sometime in the future. But with options, you can magnify your payout by narrowing your exposure based on a specific price and time horizon.

While there are lots of strategies that could be created here, we’ll outline two simple ones.

Currently, an OTM call contract with a $88K strike costs $608; so, you can buy 4 contracts for $2,432. If BTC closes on May 29th at or below $88K, your loss would be the value of the contract plus fees ($2,492).

In order to break even, the price of BTC must be at least $88,623 at expiration. If BTC rallies past that price, the value of the calls increases linearly; if it closes on May 29th at $90K, the position will be worth $8K – a gain of 221%.

An alternative way to express this thesis through options is by purchasing a call spread:

Unlike simply buying calls, the break-even price for this position is much lower at $84,065.

Since you’re selling calls to offset the cost of the ATM purchase, the max loss is also lower at $2,065.

In return for lowering risk and downside, this position also caps your upside; if BTC breaks above $90K, the position’s value will no longer increase.

The max profit of $5,935 – a 162% return – will be attained if BTC closes on May 29th at or above $90K.

This is just one example of how option positions can be constructed in various ways to express the same view while managing risk. 

Alternatively, an example of a project that uses options to secure consistent yield while minimizing volatility is Main Street Finance, which passes option-derived yield onto holders of their msY token – for more information on Main Street, we covered the project here on Monday.

Ultimately, options’ flexibility also makes them ideal “all-weather” assets.

Unlike perps, options aren’t only useful for capturing moves in trending markets; there are also plenty of options strategies that are tailored for boring, sideways markets. This customization is the reason that options are used by professional asset managers to manage risk in countless ways across asset classes.

Additionally, many professional asset managers are required by regulators to manage risk in a certain way, and they frequently use options to minimize downside and/or volatility within a portfolio. Now that institutional adoption is driving traditional asset management strategies onchain, options will play an increasing role in how risk is managed in DeFi.

Now that we’ve established how options are useful and have significant institutional demand, another question must be answered: why should investors, traders, and money managers be interested in DeFi-native option markets like Derive?

It all starts with DeFi’s 3 core properties that are not possible with legacy financial products – permissionlessness, composability, and programmability.

DeFi’s programmability allows these strategies to function in virtually infinite ways, while automatically distributing yield back to tokenholders at specified intervals.

Composability further expands the potential for customization, as strategies can seamlessly integrate any asset from any compatible blockchain.

And these strategies can be accessed by the general public easier than ever, thanks to permissionlessness.

Additionally, the options sector of DeFi consists of significantly fewer projects than spot or perps, giving Derive an advantage to capture a higher market share. As we’ll see later in this article, Derive plans on using DeFi’s unique advantages to fulfill their broader vision. But before we get to that, let’s take a look at how 2026 has been a breakout year for Derive’s option platform.

In March, traders on Derive generated over $1.8B in notional volume – more than double the value of any other month in the platform’s history

That was the first time monthly option volume exceeded $1B – and they’re about to do it for the third month in a row

So far this month, Derive has generated $561M worth of notional options volume in just 12 days, putting it on track to reach $1.45B for the month, a ~300% increase from last May!

If you zoom out even more, you can see that 2026 volume has almost surpassed that of 2025 – and we’re not even 5 months into the year! 

As of May 12th, annual volume is currently sitting just below $5B, compared to $5.43B for last year.

Another thing to note is that this volume is being generated without a corresponding jump in the number of trades – that means traders are using Derive to execute trades of much greater size, which highlights the platform’s deep liquidity.

As Derive continues to find product market fit as a highly-liquid destination for option trading, the future plans for the platform will use this liquidity to become much more than a traditional options market.

According to Derive’s CEO, the vision is not to simply build “an onchain Deribit.” The qualities that the platform inherits from blockchain technology give it the potential to become much more than that.

In fact, DeFi’s unique capabilities give Derive the potential to become the payoff engine for onchain finance.

Specifically, DeFi’s programmability can transform how option strategies are built and distributed. Since onchain assets can be customized to fit any type of use case, a complex option strategy with 6 different legs can be programmed into a single token. 

This “option token” could be traded by a vault, which runs on specialized logic that automatically executes trades at the best available price and adjusts the position as needed.

Additionally, DeFi’s permissionlessness allows these countless payoff structures to be accessed by anyone. 

This programmable, permissionless environment is exactly the future that Derive envisions.

Over the coming months and years, Derive aims to become DeFi’s central liquidity hub for specific instruments, built with options, that are tailored to achieve any outcome – and anyone will be able to build and invest in these products.

This opportunity carries massive implications. As DeFi matures, the demand for products like this will be accelerating for years to come.

This demand has been confirmed by the success of platforms like Ethena, whose USDe/sUSDe stablecoin essentially tokenized the basis trade by using actively-managed strategies to earn yield via perps funding rates. This single tokenized strategy attracted billions of onchain capital, and Derive is building for a future where it supports the construction, execution, and management of virtually any possible strategy using options.

The Derive team is currently hard at work building the platform’s next major upgrade, which is set to launch by the end of 2026.

This upgrade will enable one-click vaults, strategies, and structured products, creating a unique environment where seamless access to option strategies is available for professionals and retail investors alike.

AI agents will also play a major role in this upgrade. Agents can monitor news, prices, broad market trends, and more 24/7/365, giving users constant access to detailed insights on trade ideas based on simple plaintext inquiries. 

Using the above example, a user will simply be able to type “I think BTC will hit $90K by May 29th, how can I express that idea through an option trade?”

And in a matter of seconds, an agent will reply with various positions and spreads that can profit from that idea, the payoff structure for each one, and step-by-step instructions for how to create and execute the trades.

Tokenized assets also play a major role in the future of Derive. Soon, the scope of onchain option strategies will expand beyond crypto assets into traditional markets such as stocks, fixed income, FX, commodities, and more.

As we’ve seen with the proliferation of Hyperliquid’s HIP-3 assets, the demand for exposure to traditional markets is extremely high. Derive is currently positioned to be the first to capture that demand while offering unmatched flexibility via option markets.

On Wednesday, we used Derive to take our first bearish position in the Machines & Money Portfolio. 

Specifically, we’re hedging our many long positions with a bear put spread expiring on May 29th. 

In simple terms, a bear put spread benefits if the ETH price declines by a certain amount between now and expiration. It uses option strike prices to set a natural stop loss and target price. However, unlike an actual stop loss, the pseudo-stop loss in this case doesn’t close the trade – it simply stops your position from experiencing further losses.

The spread contains two positions:

Essentially, the strike price of the long put is a stop loss, and the strike price of the short put is the target price.

Now, let’s walk through the process of putting on this trade. Of course, the first step was to connect our wallet and enable trading on Derive.

Next, we had to deposit funds. Derive’s flexible platform allows deposits from a wide selection of networks. We used Base for our deposit, but we also had the option to deposit from Ethereum, Arbitrum, Optimism, HyperEVM, and Solana.

Once this process was complete, we entered our trade details for the bear put spread:

All trades on Derive are routed through one of two execution methods: Orderbook and Request-For-Quote (RFQ). Typically, multi-leg option positions are executed via RFQ, where a network of market makers competes to offer the lowest price. 

In the top right corner of the next screenshot, you can see that RFQ is selected for execution – so, the next step was to request a quote.

Once we clicked Request Quote, the details were updated, and we could click Buy To Open.

As you can see in the screenshot below, the RFQ network was able to provide an offer price below the existing market price: 

After our trade was filled, our official breakeven price, max gain, and max loss were as follows:

In order to break even, the price must be at or below $2,220.90 at expiration. When this trade was placed, the price was at ~$2,253, roughly 1.5% above the breakeven price.

The strike price of the OTM put represents our target price – so, we’ll realize our max gain of ~$720 (+147%) if the price is at or below $2100 at expiration. 

And the strike price of the ATM put represents our stop loss – we’ll take a max loss of ~$490 if the price is at or above $2300 at expiration. 

While the demand for a liquid, high-quality options market onchain was already clear, the actual process of using Derive for this trade further confirmed our belief in the project’s future success. Not only is it easy to use, but it provides real-time data for any option position you can think of. 

While we didn’t use Derive’s Strategy Builder this time around, it’s another great resource to help traders navigate through positions they can take to profit from any market outlook. We’ll dive into this feature in our next Derive piece!