How Derivatives Trading Works
Derivatives trading involves the buying or selling of financial contracts that derive their value from the performance of underlying assets like Bitcoin (BTC). Unlike spot trading, where traders buy or sell the actual assets, derivatives trading allows traders to speculate on the future price movements of an asset without directly owning it. A BTC futures contract is a popular derivative used for trading, allowing traders to speculate on the future price of BTC. For example, with a BTC futures short position, you earn a profit if the BTC price decreases. With a BTC futures long position, you earn a profit if the BTC price increases.
There are certain terms to understand when trading futures contracts, such as futures price, contract size, underlying asset, and expiration date. When a trader buys a BTC futures contract, they are agreeing to buy or sell BTC (or settle the equivalent value in cash, depending on the type of contract) at a predetermined price, known as the futures price, upon the contract’s expiration. Traders have two options: they can either sell the contract before the expiration date to close their position, or allow the contract to be automatically settled at expiration.
At the time of buying a contract, you do not own the underlying BTC. Instead, you are entering into an agreement to buy or sell Bitcoin at a predetermined futures price at the contract’s expiration. You can close your position by selling the contract before expiration. Your profit or loss depends on the difference between the futures price (the price at which you agreed to buy or sell BTC) and the market price of BTC at the time you close the contract or at expiration.
Futures trading often comes with margin and leverage:
- Margin: The capital you need to open a derivatives position, which is usually a fraction of the total contract value.
- Leverage: The ability to control a larger position with a smaller amount of capital. Leverage magnifies both potential gains and potential losses, and increases overall risk.
Selecting the Best Derivatives Exchange
Many crypto exchanges support both spot and derivatives trading, though not all derivatives products may be available on every platform. When selecting a crypto exchange specifically for derivatives trading, consider several key factors: platform security, trading tools, risk management tools like stop-loss orders, leverage options, portfolio management features, and supported contracts.
Risk management tools such as stop-loss orders are very helpful when trading contracts. Additionally, analytics tools play a crucial role in making informed trading decisions. Always look for these tools when choosing a derivatives exchange to ensure proper risk management is in place for your trading journey.
This review explores the top derivatives exchanges with robust security features and comprehensive trading tools.
1. Deribit
📈 Deepest Options Market – Trade Bitcoin and Ethereum options with unmatched liquidity, making it easier to enter and exit even very large positions.
🛡️ Smart Risk Controls – Use portfolio margining and real-time risk tools to manage exposure safely while keeping capital efficient.
⚡ Built for Speed – Ultra-fast trading engine ensures orders are executed instantly, ideal for professional and high-frequency traders.
⭐ 4.8/5
Deribit is a sophisticated derivatives exchange designed to streamline derivatives trading by offering advanced tools. It provides a diverse range of derivatives products including futures, perpetuals, and options contracts, and known to have the largest share in BTC options market. Deribit’s Options Wizard is an innovative tool that helps users find the best options trading strategy based on their price prediction. Another valuable tool is position builder which allows users to create and view multiple portfolios, enabling the execution of advanced trading strategies.
In addition to derivatives trading, Deribit supports spot trading for users who want to swap cryptocurrencies. The platform offers deep liquidity for both spot and derivatives assets, enhancing trading efficiency. To build trust and ensure security, Deribit has implemented a proof of reserves system and has earned an ISO security certificate, reflecting its commitment to robust security practices.
2. BitMEX
📊 Pioneer of Perpetual Swaps – First to launch BTC perpetual contracts, now among the most traded in crypto.
⚡ High Leverage Options – Up to 100× leverage lets small capital control big positions, with higher risk and reward.
🔒 Robust Security & Transparency – Multi-sig cold wallets and an insurance fund help protect traders from losses.
⭐ 4.7/5
BitMEX is a professional derivatives exchange that provides deep liquidity for several contracts. Features such as fee discounts and VIP services make this platform an attractive option for both spot and derivatives traders. The transaction fees are low compared to most other derivatives exchanges. Users can get further discounts on fees by using BMEX, the native token of the BitMEX ecosystem.
Although the platform was launched in 2014, it introduced more features which expanded the BitMEX ecosystem. In 2016, it launched BTC perpetual swap contracts, leverage options, and advanced order types. The BMEX token was announced in 2021 and officially listed for trading in 2022. Interestingly, the platform offers up to 100x leverage on some of its derivatives products, allowing traders to open large positions with small capital.
3. Bybit
📈 Fast Growing Liquidity – Deep order books for BTC and major altcoins make it easy to enter and exit trades.
⚡ Advanced Trading Tools – Offers conditional, reduce-only, and iceberg orders to manage positions efficiently.
🛡️ Secure & User-Friendly – Multi-tiered security plus a clean interface for both beginners and professional traders.
⭐ 4.5/5
Bybit is a versatile cryptocurrency exchange offering a diverse range of spot and derivatives assets. Users can efficiently trade both spot assets and derivatives contracts, benefiting from advanced tools such as a unified trading account and various order types, including limit and conditional orders. The platform provides up to 100x leverage on perpetual contracts, allowing traders to amplify their positions. Bybit’s unified trading account enables users to execute options, perpetuals, and futures strategies seamlessly.
For derivatives trading, Bybit offers two notable trading bots: the futures grid bot and the futures martingale bot, which automate trading processes. Additionally, Bybit provides DeFi services like staking. The platform is known for its industry-leading security measures, ensuring a safe and convenient trading experience.
4. OKX
📊 Wide Range of Derivatives – Trade futures, options, and perpetual contracts across many crypto assets.
⚡ Flexible Leverage & Margin – Adjust leverage per trade and use cross or isolated margin to manage risk.
🛡️ Security & Transparency – Implements cold wallets, multi-signature protection, and regular audits for user funds.
⭐ 4.4/5
OKX is an advanced crypto exchange that supports both spot and derivatives trading. It is particularly suited for experienced traders who employ advanced trading strategies. The platform provides a well-structured and unified trading interface, enabling both automated and manual trading. OKX offers several advanced order types, including conditional orders, which are valuable for automating the buying or selling of contracts based on predefined criteria.
Additionally, OKX provides trading bots such as futures grid and futures DCA, designed to exploit specific market conditions for potential profit. Overall, OKX delivers a comprehensive trading experience for both spot and derivatives trading.
5. Phemex
📈 Basket & Scaled Orders – Trade multiple pairs at once or ladder entries/exits to manage positions easily.
⚡ High Leverage Futures – Up to 100× leverage on USDT or coin-margined contracts for flexible trading.
🛡️ Beginner-Friendly & Educational – Offers copy trading, mock accounts, and extensive guides for learning crypto trading.
⭐ 4.3/5
It is a crypto exchange that supports spot and futures trading of a vast range of tradable assets with advanced order types. For both spot and futures trading, there are several trading bots grouped in three categories depending on the market condition they are suitable for, such as sideways, bullish, and bearish. The spot and futures trading come with multiple advanced order types designed for custom strategies and risk control. Some examples include:
- Basket orders: Trade multiple pairs at once with pre-set ratios.
- Scaled orders: Create a series of buy/sell orders across a price range, similar to scaling trading strategies.
For derivatives traders, Phemex offers a wide range of futures and perpetuals contracts settled in USDT or other crypto, up to 100× leverage, and multiple advanced order types. Apart from standard trading tools and services, Phemex also offers copy trading and vast educational material for beginners who are still learning crypto trading.
Currently, in August 2025, Phemex is running a futures trading competition—new users who place their first futures trade of at least 100 USDT receive a 200 USDT position voucher, and all participants can win a share of a 50,000 USDT prize pool by hitting trading volume milestones.
