Derivatives exchange giant CME Group today announced it will launch options on its Bitcoin futures contracts in Q1 2020, pending regulatory review.
Tim McCourt, global head of equity index and alternative investment products at CME, says,
“Based on increasing client demand and robust growth in our Bitcoin futures markets, we believe the launch of options will provide our clients with additional flexibility to trade and hedge their bitcoin price risk.
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.”
Options on a futures contract allow the holder to buy or sell a specific futures contract at a strike price on or before the option’s expiration date – without any express obligation to do so.
According to CME,
“An advantage of options on futures is the ability to reduce risk in your portfolio in different ways. Whether you are looking to trade in an uncorrelated market to diversify risk, hedge existing positions to limit risk, or directly trade more volatile markets at a reduced cost from the futures contact alone, options on futures can be a way to do this.”
The company confirms that institutional interest has continued to build with the number of large open interest holders reaching a record 56 in July.
Since launching their Bitcoin futures in December 2017, CME has completed 20 futures expiration settlements with more than 3,300 individual accounts trading the product.
The exchange reports that an estimated 7,000 CME Bitcoin futures contracts, equivalent to about 35,000 Bitcoin worth $355 million, have traded on average each day, year to date.