In mid-September, the foreign exchange company CME Group announced the launch of options on its bitcoin futures contracts in Q1 2020, pending regulatory review. CME Group executive Tim McCourt said there was “increasing client demand” for the firm’s bitcoin derivatives and now the company has published specifications for the options products.
CME Group’s Bitcoin Options
The global markets company CME Group has provided clients with the ability to hedge or trade benchmark options on futures across nearly every asset class. The firm has an average daily volume of $4.3 million this year and aims to offer options on bitcoin futures so investors can have a variety of different methods to trade the asset. When CME announced the launch of bitcoin options, McCourt detailed that the new product will provide “clients with additional flexibility to trade and hedge their bitcoin price risk.” This week, following Bakkt’s recent volume surges, CME published the preliminary contract specifications for the options. Price values will be based on the CME CF Bitcoin Reference Rate (BRR) which is determined by a variety of major crypto exchanges.
The contract unit will consist of one bitcoin futures contract, which is approximately five BTC quoted in USD. There’s a minimum price fluctuation and the listing cycle will mirror the firm’s bitcoin futures exposure. CME’s bitcoin options on futures will be traded between Sunday through Friday on Globex and Clearport. The company notes that the BTC options product is subject to revision and review by financial regulators. “We’re working to launch options on those futures,” McCourt said to crypto analyst Benjamin Pirus in a recent interview. “The option on the bitcoin future will give the holder of that option, either a put or a call, the right — but not necessarily the obligation, to either purchase or sell the underlying futures contracts at maturity.” McCourt further stressed:
Is Bitcoin Being ‘Tamed’ Like a Traditional Investment?
Bakkt’s physically-delivered bitcoin futures product has been getting a lot of fanfare lately after the exchange topped a few new records and CEO Kelly Loeffler announced Bakkt will be offering options on bitcoin futures as well. Despite the all-time highs at the Bakkt warehouse, CME Group’s BTC derivatives have seen much more volume. CME’s Globex saw 7,242 bitcoin futures contracts on October 28 and 3,284 in open interest. The following days on Globex through November 1, contracts were between 2,200 and 3,687. November’s CME bitcoin futures contracts today stand at 2,641 contracts and December positions are starting to pile up as well.