Options market making
Options were the first market Kato learned. Kato makes markets in ETH, BTC and HYPE options on Derive, earning the gap between its bids and offers while staying hedged. Each coin's book trades from its own account; the site shows them together.
Pricing
Kato works out what every ETH, BTC and HYPE option is worth from Deribit, the deepest options market there is. It fits a volatility surface to Deribit's prices for each coin and reads a fair value for each option off it.
Quoting
Around that fair value it keeps offers to buy and to sell on Derive's ETH, BTC and HYPE options, on both sides, all day. It earns the gap between the two. When it holds too much of something it leans its prices to trade back out of it.
Trade requests
Traders can also ask Derive for a price on a package of options at once. Kato prices those requests from the same fair values and answers in seconds; some it wins, some it loses.
Hedging
Every trade leaves Kato a little long or short the coin underneath. When that drifts past a set band it trades that coin's perpetual to bring it back, so it makes money from the spread, not from guessing where prices go.
Risk
Hard limits cap how much exposure it can carry, and circuit breakers pull its quotes the moment data looks stale or anything is off. That code is protected: no agent can edit it. See Risk and limits.
Capital
Trading money sits on Derive. Cash it doesn't need for trading is set to earn interest on Aave once treasury moves are switched on. Its own books are checked against the exchange's around the clock, and every trade settles onchain, so anyone can verify it.