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Long Awaited Bitcoin Options from CME Group to be Launched Later this Month

The Chicago Mercantile Exchange (CME) Group announced last September that it would be launching options on its Bitcoin futures contracts in Q1 of this year. Bitcoin options on CME are set to launch on Jan 13, just five days away, pending regulatory approval.

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CME, the world’s largest futures exchange, was one of the first institutional financial bodies to offer futures trading on Bitcoin in December of 2017 amid an epic rally that took the leading cryptocurrency to its all-time high. The announcement offering options comes as demand continues to skyrocket for cryptocurrency futures offerings.

Sometime Last Year

It was reported that CME is going to add another bitcoin product to its marketplace. The exchange has announced that the options product is pending regulatory review.

“Based on increasing client demand and robust growth in our Bitcoin futures markets, we believe the launch of options will provide our clients with additional flexibility to trade and hedge their bitcoin price risk,” said Tim McCourt, global head of equity index and alternative investment products at CME.

More Bitcoin Business in the Offing

Derivative trading on Bitcoin has become very popular as of late with CME, and CBOE offering institutional cash-settled options since 2017. Bakkt has also recently joined the ranks, providing a new opportunity to have futures contracts settled physically.

 

The Bitcoin options offering from CME will add to the company’s repertoire and hopefully appease the growing interest of investors on the platform. CME also reportedly filed to double its monthly Bitcoin futures open positions limit to 10,000 BTC in September last year due to increased demand.

CME Group vs Bakkt: The Arms Race

The options will allow traders to use alternate strategies and allow traders to save on margins using margin offsets. These upcoming options will have a tick size of $5 per BTC and thus, with the contracts being 5 BTC, will move in increments of $25.

To understand the relationship between options on Bitcoin futures and Bitcoin futures, CME explains:

“CME options on Bitcoin futures give the buyer of a call/put the right to buy/sell one Bitcoin futures contract at a specified strike price at some future date. Upon termination of trading, in-the-money options, expire into one Bitcoin futures contract which immediately cash settles to the CME CF Bitcoin Reference Rate (BRR).”

Growth for the Bitcoin Market?

The evolution of Bitcoin into a more traditional investment arena with derivative trading has been heralded as a sign of maturity. It is a gateway for traditional investors to get exposed to the often volatile, but exciting market and could lead to further growth and adoption for the asset.

On the other hand, there are some that feel this influx of speculative traders only brings more clueless traders to the nascent market which could be damaging to its maturation.

For traders to essentially make bets on the movement of the market without having to own any of it seems to promote volatility without any risk being placed on the trades who settle in cash. It is for this reason that many see Bakkt as a potentially revolutionary product to breach the middle ground.

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