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Derivatives Giant CME to Add Another Option for Bitcoin Investors

By Linas Kmieliauskas
Derivatives Giant CME to Add Another Option for Bitcoin Investors 101
Source: iStock/PashaIgnatov

In response to "growing interest" in crypto and customer demand, U.S.-based CME Group said it aims to launch options on bitcoin futures in the first quarter of 2020, pending regulatory review.

"These new products are designed to help institutions and professional traders to manage spot market bitcoin exposure, as well as hedge bitcoin futures positions in a regulated exchange environment," Tim McCourt, CME Group Global Head of Equity Index and Alternative Investment Products, was quoted as saying in a press release. They claim that the new instrument will provide their clients "with additional flexibility to trade and hedge their bitcoin price risk."

An option on a futures contract is the right, but not the obligation, to buy or sell the underlying futures contract at a predetermined price on or before a given date in the future.

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Option Benefits

  • Options can be used like insurance policies to limit losses on a futures contract.
  • They can also be used for speculative purposes, whether you are selling options to receive premium income or using options to establish a position in a particular commodity, index or interest rate.
  • As hedging instruments, options can produce offsetting gains in the face of adverse price changes in the cash market.
  • Options permit you to efficiently deploy capital, in the form of option premium. In this case, you can participate in the price movements of the underlying asset, without having to buy the asset outright.

Source: CME Group
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Earlier in September, the company said that it intends to double its monthly bitcoin futures trading cap to BTC 10,000 (USD 102 million).

"Year to date, nearly 7,000 CME bitcoin futures contracts (equivalent to about 35,000 bitcoin) have traded on average each day. At the same time, institutional interest continues to build with the number of large open interest holders reaching a record 56 in July," the company said today.

Introduction to options:

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