CME Bitcoin Options Receive Regulatory Approval

The regulators have given the green light to CME Bitcoin Options. CME Group becomes the third-largest derivative player to launch options on Bitcoin Futures. Will CME Group also launch physically-delivered futures?    

14 January, 2020 | AtoZ Markets – According to the CME official website, the new type of Bitcoin derivatives contract (Bitcoin futures options) is now live. It comes in line with the CME Group’s Bitcoin Options plans announced in November 2019. CME Options launched on the CME Globex around at 15:00 UTC on Monday.

Each contract, quoted in US dollars, represents five bitcoins and is cleared centrally to avoid counterparty risk. CME relies on the trade flow data from several of the large bitcoin exchanges to accurately track the price of bitcoin.

CME’s Options on Bitcoin Futures Pass Regulatory Approval

In particular, the CME has received the regulatory approval of Bitcoin futures options. CME, one of the first exchanges to host Bitcoin futures contracts alongside the Chicago Board Options Exchange in 2017. The exchange first announced its plans for introducing options on Bitcoin futures on November 12, 2019. According to CME, the lunch of its new product is in response to customer demand and growing interest in crypto.

Bitcoin options had a strong start in 2019. Last week, daily volumes exceeded $ 90 million by Friday, according to data collected by the analyst firm Skew. About 95% of all trades last year took place on the Dutch-based exchange Deribit.

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CME Does Not Have Any Current Plan to Launch Physically-Delivered Futures

CME revealed its plans to launch bitcoin options days before the launch of Bakkt Bitcoin futures in September. The rival platform released its options and cash-settled contracts in early December. CME has previously said it has no plans to launch physically-delivered futures.

In the past, the market had a mixed response to bitcoin derivatives. Bitcoin hit an all-time high of nearly $ 20,000 shortly after the original CME futures launch. But it plummeted nearly $ 2,000 after the launch of Bakkt futures contracts. In a note on Friday, JPMorgan’s managing director for global market strategy, Nikolaos Panigirtzoglou, said: “The signs suggested that institutional investors were preparing for CME’s launch.” 

The exchange data show that open interest in bitcoin futures has increased by 69 percent from the end of the year until last Friday, reaching a seven-month high.

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