Trading Derivatives FAQ (UAE)
This guide outlines the key features and risks of the derivatives products (“Derivatives”, also known as Exchange Traded Derivatives or “ETDs”) offered by OKX Middle East Fintech FZE (“OKX”).
OKX holds a VASP Licence (reference VL/23/12/003) issued by the Dubai Virtual Assets Regulatory Authority (VARA), which permits it to provide Virtual Asset Exchange Services, including Virtual Asset Derivatives Trading.
This article should be read together with our Risk Disclosure Statement, as well as the Margin and Derivatives Trading Agreement.
Introduction to Derivatives
Derivatives are financial products that derive their value from the price of an underlying Virtual Asset. They allow you to gain exposure to price movements without directly owning the underlying Virtual Asset.
Perpetual Futures (“Perps”): Contracts with no expiry date that closely track the price of an underlying Virtual Asset. Perpetual futures use periodic funding payments between traders to help keep the contract price aligned with the underlying market price.
Futures Contracts: Contracts to buy or sell a Virtual Asset at a predetermined price on a specified future date.
Options Contracts: Contracts that give you the right, but not the obligation, to buy or sell a Virtual Asset at a predetermined price on or before a specified date.
Most derivatives are traded using leverage (margin), which allows you to control a position larger than your initial deposit. While leverage can amplify potential profits, it can also amplify potential losses, including the risk of losing your entire initial investment.
Eligibility to Trade Derivatives
Derivatives trading is only available to clients who meet our eligibility requirements.
To access derivatives trading, you'll first need to complete an eligibility and suitability assessment. As part of this process, we'll classify you as a Retail Investor, Qualified Investor, or Institutional Investor and assess whether derivatives trading is appropriate for you. This assessment takes into account factors such as your knowledge and experience, financial circumstances, and risk tolerance.
Your access to derivatives trading depends on the outcome of your eligibility and suitability assessment. If you meet our requirements, you'll be able to access our derivatives products. If you don't meet the requirements, derivatives trading won't be available.
For more information about our eligibility and suitability requirements, please refer to our guide here.
Key risks of Trading Derivatives
Trading derivatives involves significant risk and may not be suitable for everyone. Before trading, make sure you understand how derivatives work, the risks involved, and the potential impact on your investment.
While margin requirements, liquidation mechanisms and our security fund are designed to help manage risk, they do not guarantee that losses will be limited. In extreme market conditions, you may lose all of the funds you invest, incur losses that exceed your initial investment, and owe a negative balance to us.
You should only trade with money you can afford to lose. The main risks include:
High leverage: Leverage magnifies both gains and losses. As a result, you may lose all of the funds you invest and, in some cases, incur losses that exceed your initial investment.
Market volatility: Virtual Asset markets can be highly volatile, and prices may change rapidly over short periods, resulting in significant gains or losses.
Liquidation: If the market moves against your position and your margin falls below the required level, your position may be liquidated automatically, which may result in substantial losses.
Funding rates (Perps): Holding a perpetual futures position may require you to make or receive periodic funding payments, depending on market conditions and your position.
Time decay (Options): Options lose value as they approach expiry, even if the price of the underlying Virtual Asset remains unchanged.
Loss of premium (Options): If you purchase an option that expires out of the money, the premium you paid for the contract will not be refunded.
Complexity: Derivatives are complex financial products that may not be suitable for all investors. You should only trade them if you understand how they work and the risks involved.
Liquidity: Some derivatives may have limited liquidity, making it difficult to open or close positions at your preferred price. In some cases, you may not be able to close a position immediately.
Counterparty and platform risk: Trading may expose you to counterparty-related risks associated with derivatives trading. In addition, system outages, technical issues, or other operational disruptions may affect the availability of the platform and your ability to trade or manage your positions.
If you are a Retail Investor, additional protections apply, including leverage limits and enhanced risk warnings. You should carefully consider the risks described above, as losses can occur quickly and may exceed your initial investment. Make sure you only trade with funds you can afford to lose.
Additional resources
This article provides a general overview of derivatives and does not cover all risks or information you should consider before trading. Before trading derivatives, please review the following documents carefully:
Important Note: VARA’s approval of OKX Middle East Fintech FZE to provide Exchange Traded Derivatives ("ETD") Services is not an endorsement by VARA of (i) any specific ETD, or (ii) any type of ETD, offered by OKX, nor of OKX itself or any person connected with those ETDs. VARA’s approval must not be construed or considered as such, and should not be relied upon as any indication of the merits, suitability or safety of any ETD.