The planet’s largest futures exchange has just announced details of forthcoming options on its Bitcoin futures. The new cryptocurrency derivative from the CME Group is still pending regulatory approval and, as such, remains without an exact launch date.
The Chicago Mercantile Exchange (CME) Group detailed its soon-to-be-launched options in a blog post earlier today. The derivatives exchange claims that the launch is a response to growing customer demand and “interest in cryptocurrencies.”
The post states that the options will be valued based on the price of Bitcoin provided by the CME CF Bitcoin Reference Rate. This index is calculated daily from prices taken from numerous leading digital currency exchanges, including Bitstamp, Coinbase, Kraken, and others.
The CME Group says that the options will allow traders to manage exposure to Bitcoin and allow for alternate trading strategies. It adds that it will also allow Bitcoin traders to make savings on margins using margin offsets.
The new derivative will settle into the exchange’s existing BTC futures contracts. Each of these contracts, launched in Dec 2017, equals five bitcoins and is settled in cash.
The forthcoming options contracts will have a tick size (minimum price movement) of $5 per Bitcoin. The price of each contract will, therefore, move in increments of $25.
The CME Group’s options contracts are currently pending regulatory approval. The exchange says that it will launch as soon as it receives the go-ahead. It anticipates this to be in early 2020.
The detailing of the group’s latest Bitcoin product follows Bakkt’s announcement earlier this month. In a blog post, reported by BeInCrypto, the platform’s CEO Kelly Loeffler announced that the Intercontinental Exchange affiliated platform would launch options on its own physically-settled Bitcoin futures on Dec 9. She too said the move was a response to customer demand.
Both CME futures, options, and Bakkt’s options allow traders to bet on Bitcoin price swings without ever needing to actually own any Bitcoin. Some commentators have argued that the launch of such derivatives products represents the maturing of Bitcoin into a more legitimate asset class. However, for some Bitcoin purists, such speculation without traders even necessarily understanding the potentially ground-breaking implications of the cryptocurrency and blockchain technology distracts from the bigger picture and possible decentralized future of finance.
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