CME Group said the contracts would represent one-tenth of each cryptocurrency and be open not only to institutional but also retail traders, for whom the instruments were designed. Pending a regulatory review, the company intends to launch the micro options on March 28.
Options contracts are used by traders and investors for different strategies. Investors will often buy options as insurance, in order to be able to buy or sell a stock at a certain price. More fast-paced traders can also earn by essentially buying out those insurance contracts and taking on the risk for a premium. Although cryptocurrencies have started to become mainstream in the past year, their volatility has remained. This makes them ideal for such financial derivatives, to protect against the wild price swings.
Following the declining volume in its Bitcoin futures during March last year, CME launched micro versions of its Bitcoin and Ethereum futures. It had done this in a similar bid to draw in retail attention. Roughly one tenth the size of one bitcoin, “the smaller contract size enables traders of all sizes – from institutions to active retail traders – to get exposure to bitcoin prices, or hedge their spot bitcoin positions,” said Daniel Ryba, executive director of futures at E*TRADE Financial.
Following the release of these micro crypto futures, CME reported in its second quarter financial results a revenue of $1.2 billion and an average daily volume growth of 5%, which it attributed to the micro futures. “We have built a $100 million a year business so far that didn’t exist just a couple of years ago with our micro product,” Chief Financial Officer John William Pietrowicz said of the micro futures.
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