CME Group’s forthcoming launch of Bitcoin options will likely be lapped up by Asian crypto players.

Asian crypto traders and miners, along with European speculators and hedgers, already account for nearly half of the trading of CME’s bitcoin futures product. CME Bitcoin futures launched nearly two years ago.

Bitcoin options, used along with futures, would allow these players to fine-tune the management of their exposure and risk to the cryptocurrency.

Advantage: Bitcoin options

Options are particularly useful for Bitcoin miners as a hedging tool to lock-in their cost of production and profits. According to CME, certain Chinese miners are already using Bitcoin futures as a hedging device.

Tim McCourt, CME Group’s global head of equity products and alternative investments, said futures simply tracked the underlying Bitcoin price. However, Bitcoin options allow a trader to protect the downside or assume upside exposure at a very small price called the option premium. These option transactions can reference varying prices (strikes) and expiry periods.

Meanwhile, CME is aiming to launch the new Bitcoin options products in the first quarter of 2020. However, the exchange is currently focusing on obtaining regulatory clearances and launch preparations.

How deep is the market?

However, participants are questioning the depth of the Bitcoin derivatives market after the recent launch of Bakkt Bitcoin futures. Introduced by competitor International Exchange, these futures have met with a tepid response. Only 900 contracts traded in the two weeks after launch.

In contrast, on the CME exchange, about 7,000 bitcoin futures contracts traded daily on average this year. That’s equivalent to approximately 35,000 Bitcoins.

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