August 12, 2020

CME Group will launch options based on bitcoin futures

CME Group will launch options based on bitcoin futures

The Chicago Mercantile Exchange (CME Group) this Friday officially confirmed the plan to launch options on the base of existing bitcoin futures.

As the company explains, the decision to launchBitcoin options were dictated by the “growing interest in cryptocurrencies and the demand of customers for tools to control access to bitcoin.” The launch of the tool will take place in early 2020.

Unlike futures, where both parties are requiredto fulfill the terms of the contract, the option gives its buyer the right, but not the obligation, to buy or sell the asset at a predetermined price at a certain point in the future. In this case, the option seller cannot refuse to fulfill the terms of the contract. He compensates for additional risks with the premium that the buyer gives him when concluding the contract.

“Based on increasing customer demand forIn our Bitcoin futures market, we believe that the launch of options will allow customers to provide additional flexibility in the trading process and provide them with another tool for hedging the risks of bitcoin prices, Said Tim McCourt, head of CME's alternative investment products.

These new products are designed to help.institutions and professional traders to manage access to bitcoin in the spot market, as well as hedge futures positions in a regulated exchange environment. ”

Currently traded on the CME platformBitcoin futures contracts, which were launched at the end of 2017. Opening options based on existing futures will require additional evaluation by the regulator.

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