Cryptocurrency traders now have a new way to gain exposure to Bitcoin. CME Group, owner and operator of leading derivatives, options and futures exchanges, opened options on its Bitcoin futures contracts on Monday.
According to the announcement,
“Options on Bitcoin futures offer greater capital efficiencies and a new way to manage bitcoin exposure.”
The release of CME’s Bitcoin options is the next level of its hedging business, which first began in December of 2017 when it launched Bitcoin futures.
Ahead of today’s launch, CME’s Bitcoin futures open interest (OI) started the first four trading days with 5,400 contracts on January 7, up 69% from year-end OI, prompting optimism for BTC options.
CME options on Bitcoin futures give the buyer of a call or put the right to buy or sell one Bitcoin futures contract at a specified strike price at some future date.
As a reminder, while options and futures are both financial products that investors use to make money or to hedge current investments, they are not the same.
An option gives an investor the right, but not the obligation, to buy or sell shares at a specific price at any time, as long as the contract is in effect. A futures contract requires a buyer to purchase shares, and a seller to sell them on a specific future date, unless the holder’s position is closed before the expiration date.
According to crypto derivatives data tracker Skew, the global BTC futures trading volume crossed the $20-billion mark on January 8, as the Bitcoin derivatives market continues to expand, attracting traditional and institutional investors.
Thus far, however, interest in other options products has been rather small, according to JPMorgan Chase analyst Nikolaos Panigirtzoglou, who believes that options from a big player like CME could ignite much more enthusiasm.
In a recent research note, Panigirtzoglou highlights the steep increase in activity of the underlying CME futures contract, reports Bloomberg.
Panigirtzoglou writes,
“This unusually strong activity over the past few days likely reflects the high anticipation among market participants of the option contract.”
CME joins other exchanges offering a BTC options product. Bitcoin derivatives exchange FTX launched its BTC options on Saturday, announcing that volume quickly reached $1 million.
In December, Bakkt announced two new products: Bitcoin options as well as cash-settled futures.
Over the past seven days, the price of Bitcoin has shot up from about $7,500 to more than $8,100, at time of writing, with BTC reaching as high as $8,400. Bitcoin is currently trading at $8,133, according to price aggregator CoinMarketCap after starting the year at $7,191.
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