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CME publishes specifications of planned bitcoin options contracts

Thu, 31 Oct 2019, 12:33 pm UTC

Following its initial announcement to launch bitcoin options contracts in Q1 2020, derivatives marketplace CME Group has now revealed the specifications.

According to the details published Wednesday, each options contract would be based on one of CME’s bitcoin futures contracts, which comprises of five bitcoin per contract, CoinDesk reported. The contracts would be quoted in U.S. dollars per one bitcoin.

The minimum price fluctuation for a regular tick is 5 index points (equal to $25), for premium greater than 25 index points, while the minimum price fluctuation for a reduced tick is one index point, (equal to $5) for premium at or below 25 index points.

“CME options on bitcoin futures settle into 1 bitcoin futures contract upon termination of trading,” CME said.

The contracts would trade from 5:00 P.M. Central Time (CT) Sunday to 4:00 P.M. CT Friday. The launch, however, is subject to regulatory approval.

CME said that its plan to launch bitcoin options contracts is driven by customer demand for additional bitcoin trading tools.

In a recent interview, Tim McCourt, CME Group Global Head of Equity Index and Alternative Investment Products, explained that the bitcoin options contracts will give holders the right, but not the obligation, to purchase or sell the underlying futures contracts at maturity.

“It’s very similar to the way other options in the marketplace work. The difference here is the underlying, or the deliverable, of the options contract, is a CME Group Bitcoin future,” he said (as quoted by Cointelegraph).

McCourt said that these new products will help institutions and professional traders to manage spot market bitcoin exposure, as well as hedge Bitcoin futures positions in a regulated exchange environment.

Meanwhile, Bakkt, which went live with its bitcoin futures trading platform in September, has also revealed that it will be launching options contract for bitcoin futures on December 09, 2019. CEO Kelly Loeffler said that the launch is driven by customer feedback, adding that the bitcoin options contracts have been designed to “hedge or gain bitcoin exposure, generate income, and offer cost and capital efficiencies.”

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