Hedging and trading bitcoin has been crucial contemplating fundamental developments, it needs strategically establishing derivatives trades so that a gain or loss in the underlying exposure is offset by the changes to the value of the other position.

Usually, if one is prone to the risk factor associated with the open positions, then that should certainly be mitigated the risk either by reducing the position or by squaring it off or add some derivatives contracts to it.

We have got quite a few crypto-derivatives facilities in place that are regulated, while the new cryptocurrency start-up, Bakkt established by the Intercontinental Exchange (ICE), has already launched bitcoin options, futures contracts with physical delivery as well as cash-settled facilities, CME has also scheduled to unveilthe options trading mechanism for bitcoin, likely to commence from January 13, 2020.

Amid the mounting interest for the cryptocurrencies and customer demand for tools to manage bitcoin exposure, CME Group will launch options on Bitcoin futures (BTC) on 13th of this month.

CME BTC Options Contracts Specifications:

Contract unit: 1 Bitcoin Futures contract (which represents 5 bitcoin), price quoted in USD

Exercise procedure: European style (with no contrarian instructions)

Minimum Price Fluctuation: 5 index points ($25.00)

Settlement: Option exercise results in a position in the underlying cash-settled futures contract. In-the-money options are automatically exercised into expiring cash-settled futures, which settle to the CME CF Bitcoin Reference Rate (BRR) at 4:00 p.m. London time on the last Friday of the contract month.

Below are the key benefits & properties of CME’s options trading mechanism:

Value based on the regulated, robust CME CF Bitcoin Reference Rate (BRR), which is calculated daily using trade flow from major bitcoin exchanges and trading platforms

Settles into actively traded CME Bitcoin futures (BTC)

Offers BTC traders potential to save on margins, through margin offsets

Mitigates risk of counterparty default through central clearing.

Expands your choices for managing risk and building strategies.

The underlying bitcoin prices along with the other major cryptocurrencies have gained in the major exchanges today, BTCUSD surged over 2.30%, while ETHUSD rose 3.20% and XRP gained 0.96%.

Thereby, the market capitalization of cryptocurrencies has risen to $201.567 billion. The dominance of Bitcoin is 68%, Ethereum (ETH) 7.5% and XRP 4.28%, as per the coinmarketcap.