Institutional investors are increasingly adapting options strategies developed in bitcoin markets for use in altcoins as they seek better tools to manage volatility and improve risk-adjusted returns, digital asset derivatives firm STS Digital told CoinDesk.

According to STS Digital co-founder and CEO Maxime Seiler, approaches such as covered calls, put selling and downside hedging — long staples of institutional bitcoin trading — are now being applied more broadly across alternative cryptocurrencies. The firm’s client base includes asset managers, token foundations, venture capital firms and large holders positioning around liquidity events.

“Historically, these strategies were primarily used in bitcoin,” Seiler said. “We’re now seeing institutions extend that playbook to altcoins as those markets mature.”

Options contracts give buyers the right, but not the obligation, to buy or sell an underlying asset at a set price on a future date. Call options provide upside exposure, while put options offer protection against declines. Sellers receive an upfront premium in exchange for assuming that risk, effectively acting as insurers.

In bitcoin markets, institutions have frequently used covered call strategies — selling calls above spot prices — to generate income on existing holdings. Since the early 2020 market selloff, this approach has become a core institutional strategy, alongside selling puts to boost yield, buying puts for downside protection and purchasing calls to maintain upside exposure.

STS Digital said similar strategies are gaining traction in altcoins, a trend reinforced by recent episodes of market stress. The Oct. 10 selloff, during which forced liquidations and auto-deleveraging mechanisms amplified losses, highlighted the limitations of traditional derivatives structures in volatile altcoin markets.

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

STS Digital operates as a regulated digital asset trading firm and principal dealer, providing liquidity across options, spot markets and structured products for more than 400 cryptocurrencies. The firm settles billions of dollars in altcoin options volume each year through bilateral trades, acting as counterparty to clients to ensure immediate execution.

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

Seiler said he expects institutional adoption of options tied to bitcoin and altcoins to continue expanding, with derivatives increasingly seen as 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.