Largest derivatives exchange in the world launches Bitcoin options in January

  • The Chicago Mercantile Exchange (CME) will offer Bitcoin options on its trading platform from January 13, 2020.
  • This should give investors more opportunities to better manage their investment risk.

The adaptation of Bitcoin is significantly responsible for its distribution and use in the financial market worldwide. So far, new financial products in the form of Bitcoin ETFs have been rejected by the Security and Exchange Commission. However, novel financial products such as Bitcoin warrants are on the rise, especially in the United States.

CME launches Bitcoin options as of January 2020

The US American CME Group is one of the world’s largest options exchanges and the world’s largest futures exchange and will offer Bitcoin options from 13 January 2020, the exchange announced a few hours ago. The planned warrants for the offered Bitcoin futures contracts will be available to investors.

Demand has risen sharply in recent weeks and months, so CME has decided to meet its customers’ needs and launch the new Bitcoin Option financial product early next year. However, this announcement is subject to change as not all authorities have yet given their final approval.

A futures contract will have a volume of 5 BTC, the value of which will be expressed in USD. The official announcement further explains this:

CME options on bitcoin futures settle into 1 bitcoin futures contract upon termination of trading. CME bitcoin futures are based on the CME CF Bitcoin Reference Rate (BRR), which aggregates bitcoin trading activity across five major cryptocurrency spot exchanges between 3:00 p.m. and 4:00 p.m. London time.

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Great expectations and increasing adaptation

Tim McCourt, Head of Investment Products for the CME Group, says that Bitcoin options will meet with strong demand from institutional investors, who will be able to trade large amounts of capital and further hedge their risks with Bitcoin warrants. According to McCourt, there is a particularly strong demand for Bitcoin warrants in Asia.

The official announcement continues:

The futures contract trades over 30,000 bitcoin per day and the addition of a new hedging instrument gives these clients a new means to hedge their risk.
A more robust derivatives market should improve the price efficiency and liquidity of the underlying spot market, an important step for any regulatory approval on future financial vehicles.

Bakkt also announced that it will offer Bitcoin options on its Bitcoin Futures products from December 09, 2019. Bakkt offers physically covered Bitcoin futures contracts. The CME in the same breath stated that it will not move to launch “physical Bitcoin futures”.

According to Gabour Gurbacs, CEO at VanEck, the adaptation of Bitcoin through new financial products such as Bitcoin Options and Custody Services will pave the way for more trend-setting products such as a Bitcoin ETF:

These type of solutions should help foster Bitcoin adoption among regulated institutions as well as pave the way for regulated investment vehicles, such as ETFs.

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Whether these developments will have a major impact on the crypto currency market remains to be seen. Bitcoin’s price has continued to move sideways within the last 24 hours (+ 0.17%) and stands at USD 8,770.26 at the time of writing.

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About Author

Collin is a Bitcoin investor of the early hour and a long-time trader in the crypto and forex market. He's fascinated by the complex possibilities of blockchain technology and tries to make matter accessible to everyone. His reports focus on developments about the technology for different cryptocurrencies.

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