The ability to trade with spot and futures positions offers traders a way to hedge their risks. To bring more variety and opportunity to the market, CME Group announced plans to offer bitcoin options contracts. Though the industry is still months away from this launch, CME published an FAQ on its website to explain exactly what this product will offer.
- The launch of the bitcoin options contracts is pending regulatory approval, though CME Group hopes to launch by the start of 2020.
- CME’s release of the specification was preceded by Bakkt’s announcement of a similar product, which will launch in December 2019.
CME Group will soon be launching its bitcoin options contract, and they’ve recently released information about the specifications that will govern this new product. In a reveal on Wednesday, the exchange stated that every contract will be based on the existing bitcoin futures contracts that CME Group already has established, which is made up of five bitcoins. Trading from 5:00 pm CST on Sunday to 5:00 pm CST on Friday, they will be quoted in USD per Bitcoin, and the regular tick size will be $25. However, there will be $5 for reduced tick sizes.
Consumers will likely have most of their questions answered about these remedies with the FAQ available through CME Group, which revealed that the options will be settled into a singular futures contract at the end of trading.
The launch of options contracts with their current bitcoin futures product was originally announced last month. At the time, CME stated that the exchange was aiming to launch during the first quarter of 2020, as long as they gained the necessary regulatory approval. The bitcoin options won’t be much different from the options contracts that CME already provides over the other futures products, though it will help consumers that prefer to hedge their risks with spot and futures positions.
In September, Tim McCourt – the global head of equity index and alternative investment products for CME – said that this product was influenced and inspired by feedback that the platform was receiving from customers. He explained,
“Where we’re at in the process, we’ve done extensive validation with members and after this announcement, we’ll continue to engage with market participants who have input on how the product should be designed and …. We’ll continue to make sure it meets their needs.”
McCourt added that the “strong” response from customers is making the platform excited. While it isn’t much different from the futures in engagement, he stated that the opportunity to have futures on a “regulated venue” is something that “resonate[s] with the marketplace.”
Just before the release of the specifications, competitor Bakkt had already announced their own product on their futures contracts, which is fairly similar to CME’s product. However, Bakkt is planning on offering its product in December 2019.
View the entire FAQ section on these contracts at cmegroup.com.