Sparrow Exchange Review – Is it Safe to Trade Options?

Today, we will review Sparrow exchange, a platform meant for easily swap your cryptocurrencies and trade options.

Summary (TL;DR)

  • Sparrow exchange is a relatively new platform for trading Options and swapping digital assets.
  • Options is a contract, giving its owner the rights, but not the obligation, to buy/ sell an underlying asset at a specified strike price before or on a specified date.
  • The platform offers TradeBoost and TradeProtect to simplify things.
  • Furthermore, you get a 50% discount on transaction fees by using SPO tokens.
  • Sparrow exchange offers a mobile app only to iOS users.
  • Moreover, the ConvertNow allows you to easily swap your digital assets.

What is Sparrow Exchange?

It came into existence in Singapore in January 2018 by Kenneth Yeo and Arian Tan; Sparrow exchange is the leading options trading platform. Furthermore, Sparrow aims to simplify the trading experience and combine technologies to provide customizable options. 

Sparrow focuses on Options Trading to minimize risks. Additionally, it provides services like trading through API and conversion of assets using ConvertNOW technology.  Furthermore, the platform’s digital custody of assets is secured with BitGo

Sparrow Exchange

Sparrow Review: Options Trading

What is Options trading?

Options is a contract, giving its owner the rights, but not the obligation, to buy/ sell an underlying asset at a specified strike price before or on a specified date. At Sparrow exchange, options are referred to as Smart Options.

  • Specified Strike Price: This is the price at which the settlement will be done irrespective of the current price.
  • Underlying Asset: This is the cryptocurrency that you’ll trade; Bitcoin or Ethereum.
  • Specified Date: The expiration date is the date at which the contract/ option will expire.

Options Trading terms:

  • Call/ Put Option: An option that gives its owner the right, but not the obligation, to Buy/ Sell an underlying asset at a specified strike price before or on a specified date, depending on the form of the option.
  • In-the-Money (ITM): It conveys that the buyer can buy assets at a lower price, and sellers can sell investments at a higher price.
  • Out-of-the-Money (OTM): It conveys the situation where the buyer, if he exercises the right, will have to pay a higher price, and the seller will have to sell at a lower price.
  • American: It settles at any date before the expiry of the contract.
  • European: It only settles on the expiration date of the contract.

What is TradeBoost and TradeProtect?

TradeBOOST and TradePROTECT correspond to SELL and BUY on the platform. Furthermore, the Sparrow exchange follows European options trading. 

TradeBOOST

It allows the Seller to collect the premium (non-refundable) in return for selling the right (not the obligation) to trade cryptocurrency.

Since sellers are obligated to settle the trade, when the buyers exercise their right to buy,  TradeBoost makes sure that the seller agrees to sell 100% of the asset. This way, the seller does not end up in a short position.

TradeBoost and TradeProtect
TradeBoost and TradeProtect

TradePROTECT

TradeProtect allows the Buyer to pay the premium (non-refundable) to obtain the right (not the obligation) to trade cryptocurrency. 

Buyers always have minimum risks involved as compared to sellers. The maximum loss that a buyer can face is the premium.

How does Sparrow Options work?

Sparrow options automatically settle on the expiration date if the settlement is In-the-Money. Conversely, the assets return to the seller if the payment is Out-of-the-Money.

Note: Traders mostly use Options trading with less capital investment; however, it is highly risky.

Sparrow Exchagne Review: Getting Started

To start trading, you have to create an account and complete the KYC. To register, follow the process below.

Steps to get create an account on Sparrow:

  • Firstly, visit the official Sparrow exchange webiste and provide your email and password.
  • Thereafter verify your details from the confirmation mail.
  • Now, click on Start Verification to continue with the verification, or click on Skip to directly enter your account.
  • Further, if you start the verification, read the Onboarding Process and click on Accept and Continue.
  • Although, there are four steps to the verification, namely Contact, Address, Employment, and Wealth.
  • For Address, Employment and Wealth, you need to submit government issues documents for verification.
  • Moreover, you’ll need to upload a selfie showing your face clearly.
Get started on Sparrow
Get started on Sparrow

Please note:

  • Sparrow© is not yet given a License; instead, it has been exempted till the license gets approved. 
  • It is essential to complete KYC to start trading. Plus, it takes about three days for verification and approval.

Sparrow Exchange Review: Fees

The seller of the Sparrow options receives an instant premium that the buyer pays. Furthermore, Sparrow exchange receives the transaction fees, which is as follows [one that is lower]:

  • 30% of the value of the Instant Premium
  • 0.1% of the notional value.

Furthermore, you can enjoy a 50% discount if you use the Sparrow Tokens (SPO) to pay the fee.

Mobile app

The platform only caters to iOS users and does not provide an app to android users. However, the app has an interactive and clean user interface and provides all the basic features.

Sparrow Exchange Review: Mobile app
Sparrow Exchange Review: Mobile app

Sparrow Review: Dashboard

The dashboard at Sparrow exchange, by default, opens in the Account tab. Furthermore, it comes with the following profile-specific services:

  • Activities: Shows the actions done to date.
  • API Management: It provides a suite for testing and trading via a programming interface.
  • Address Management: Maintains log of cryptocurrency address. 
  • Identity Verification: Keeps verification details.
  • Preferences: Selection for trading fee, email notification, and default language.
  • ConvertNOW: To swap digital assets.
Sparrow Dashboard
Sparrow Dashboard

ConvertNOW (Swap you assets)

The ConvertNOW is helpful for seamless conversion of digital currencies. It provides competitive prices to trade digital currency with no hidden rates.

AdvantagesDisadvantages
There is no hidden cost to swap the assets at Sparrow exchange.There are no studies concerning the underlying technology used. As a result, it becomes tricky to guess how efficiently it works in real-time.
Having a service to swap digital assets is an ideological element to include.To date, there are 33 trading pairs available. As a result, it becomes relatively limited compared to platforms like Binance.

Sparrow Token (SPO)

It is an ERC-20 utility token based on the Ethereum blockchain and can be used to avail of a 50% discount on your transaction fees. For more information, visit Sparrow exchange support.

Sparrow Exchange Review: Ease of use

Some of the noteworthy points about its UI/ UX are : 

  • The interface is eye-catching and minimalistic.
  • It is designed in a way that provides intuitive interaction.
  • Furthermore, it has a quick access button for Bitcoin and Ethereum settlement prices for the last 30 days at the top.

Sparrow Exchange Review: API 

The API-based trading comes with in-depth documentation on how to get started on trading with APIs. Furthermore, they have provided a facility to configure restrictions. Finally, you can control how the interactions will take place within the interface.

What’s required here is an initial understanding of how to trade with API. One can not simply start building the interface without expertise in the subject. What Sparrow exchange lacks are tutorials and statistics that can drive a person to give this a try.

Sparrow Exchange Review: API
Sparrow Exchange Review: API

Is Sparrow exchange safe?

The platform uses premium firewalls to separate public networks from DMZ. Furthermore, they use IP whitelisting, AES data encryptions, and Kerberos authentication. The platform even rewards contributors for finding bugs on the exchange. To learn more, reach out through support@sparrowexchange.com.

Sparrow Exchange Review: Pros and Cons

ProsCons
50% discount on transaction fees using SPO.Without KYC, you don’t have much to explore.
Security policies are in place for trading and custody of digital assets.Mobile applications are not supported for Android devices.
Provides a good starting point to beginners since it only deals with Bitcoin and Ethereum.US citizens cannot use the Sparrow exchange.
It does not accept FIAT currencies.

Sparrow Exchange Review: Conclusion

Sparrow as a product has a good conceptualization and strong support in terms of partners and technologies used. Furthermore, it provides various features to its users, such as TradeBoost and TradeProtect. However, what disappoints me the most is the absence of accepting FIAT currencies as deposits. This not only drives away people starting in this field but also slims the conversion rate. Although they do offer a 50% discount on transaction fees using the SPO token.

Frequently Asked Questions:

What is the use of SPO tokens?

As of July 2021, the only use of the SPO tokens is to offer an alternate method to pay transaction fees. However, you do get a discount on using SPO tokens to pay the transaction fees.

How to use sparrow exchange?

You can start by creating an account and completing the verification process. Moreover, you can then deposit funds and start using Sparrow options.

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