Chicago Mercantile Exchange (CME) which offered bitcoin futures back in 2017 has revealed its plan to offer Options on its bitcoin futures contracts in the first quarter of next year.
The exchange announced its plan via a release on Friday, Sept.20, stating that the launch of bitcoin option is still under the regulatory review. With this, the exchange will likely expand into crypto business – however, it particularly stated that the reason behind the latest move is to serve its clients with “additional tools for precision hedging and trading”.
If we recall, CME Group Inc has offered bitcoin futures since late 2017 – when the bitcoin price was valued around $19800. However, as per the exchange, there’s still a small but growing demand of these products among institutional and retail traders despite the bitcoin market is routed to the declining graph. Echoing the similar concern, Tim McCourt, CME Group global head of equity index and alternative investment products, stated;
“The market has continually asked us for this since the bitcoin futures launch,”
He further elaborates that;
“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.”
As futures contract enable traders to bet on the future price of bitcoin and earn the significant profit – if the proposed feature receives regulatory approvals, traders will have yet another avenue to hedge their bitcoin holdings. CME’s options launch announcement comes in a wake of bitcoin futures product to be launched by Intercontinental Exchange Inc via Bakkt in the upcoming week. To clarify the stance between two, Mr. McCourt notes that the CME’s announcement was unrelated to ICE’s operation.
“We’ve been looking at bitcoin options for a long time,” he said.
While CME settles bitcoin futures on cash, ICE offers a physically settled product. To simply, cash-settled bitcoin futures will enable the trader to receive cash whereas the customers will receive actual bitcoin in case of physically settled product.
As for now, CME holds the major portion of bitcoin futures clients as the rival CBOE exchange dropped its offering this year. To note, CME and CBOE exchange began offering bitcoin futures at the same time in 2017 – and as CBOE out of the game now, CME has recently captured the major portion of the market. Notably, CME said, there are almost 3300 individual accounts engaged in bitcoin futures trading at the CME platform.
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