CME Group today confirmed the launch date of options on its Bitcoin futures contracts as January 13, 2020, the latest move by the world’s largest futures exchange operator to expand into the crypto business.
CME’s BTC options are currently being reviewed by regulators, and the exchange operator confirmed that once the addition clears, they will be available for purchase.
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“We have worked closely with clients and the industry to establish a robust and increasingly liquid underlying futures market here at CME Group, and we believe Bitcoin options will now offer our customers greater precision and flexibility to manage their risk,” said Tim McCourt, CME’s head of equity index and alternative investment products.
The announcement’s timing is interesting as the CME has a new competitor seeking to launch the same product ahead of time, namely ICE-baked Bakkt, which revealed plans to launch its own option contracts by the end of the year.
Bakkt has already released Bitcoin futures, which settle by physical delivery, as opposed to the CME’s cash settlement.
Specifications of BTC options revealed
Chicago-based CME has offered more insights about its upcoming crypto derivatives two weeks ago. The BTC options will be priced off of the CME Bitcoin Reference Rate, an index that references pricing data from several cryptocurrency exchanges, currently made up of Bitstamp, Coinbase, itBit, Kraken, and Gemini. They’ll settle into the CME Bitcoin futures contract, which trades under the ticker BTC and equals five Bitcoins.
The CME touts the benefits of options as the potential to save on margins, through margin offsets.
The CME also provided updated metrics about its Bitcoin futures, which averaged 6,500+ contracts per day in 2019 (equal to around 32,500 Bitcoin), apparently representing institutional interest. Year-to-date volumes have almost doubled since 2018 as the exchange has signed 3,500+ individual accounts and had 22 successful expiration settlements since then.
“Since the launch of our Bitcoin futures nearly two years ago, clients have expressed a growing interest in options as another way to hedge and trade in these markets,” added McCourt.