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The recent buzzing news in the gamut of cryptocurrency is that the CME’s announcement of launching plans of options trading facility on its bitcoin futures.
On the back of CME Group’s announcement of launching options on its Bitcoin futures contracts in Q1 2020 which is now pending regulatory review, Tim McCourt, the Group’s global head of equity products and alternative investments, predicted that the exchange will likely to experience the robust demand from the miners and traders based in Asia, he revealed this while talking to the South China Morning Post.
According to him, Bitcoin futures are already a popular way for Bitcoin companies and investors to hedge their digital currency exposure. Companies that are naturally long Bitcoin, such as miners, are major users of Bitcoin futures. CME Bitcoin options, however, will enable companies and investors to manage their risk in a more precise manner.
“While futures give you a one-for-one exposure, whereby the movement of the underlying Bitcoin translates directly to a specific dollar value per contract, an option gives you varying strike-price levels and can give you either downside protection, or upside exposure at a fraction of the underlying asset’s price,” said McCourt.
McCourt expects the new CME Bitcoin options to become as popular as the exchange’s Bitcoin futures offering. CME Bitcoin futures experienced the best-ever day on May 13, 2019, when 34,000 futures contracts worth $1.3 billion were traded on the derivatives exchange.
European and Asian traders make up around half the trading volume for Bitcoin futures, which would suggest that the upcoming CME BTC options may see a similar customer demographic. With the bulk of Bitcoin miners located in Asia, the CME’s prediction of high demand out of Asia will likely turn out to be correct.
The listing is only subject to the regulatory compliance and approval, the options contracts would be a welcome development in that it expands the alternatives for investors to manage risk.
