Digital Assets: CME Options on Bitcoin Futures Now Trading
CME commenced trading in Bitcoin options on Monday.
On the first day of trading, Bitcoin (BTC) options worth $2.19 million traded on CME. This was ahead of the volume of $1.15 million traded on the rival Bakkt exchange.
However, Bitcoin options have not traded very high volumes since their launch on December 9. Bakkt has traded just over $1 million of BTC for its options contract to date.
Tim McCourt, MD at CME Group, said to The Block: “In terms of their ability to quote the market, consume the data, all technical aspects…everything worked as designed.”
Moreover, CME had announced its plans for BTC options in September 2019.
Bitcoin options: What’s in it for traders
Speaking to Decrypt, McCourt explained that demand for the Bitcoin options product was coming from futures traders that wanted to deploy specific options strategies alongside their futures positions. Firms trading options on other asset classes on CME are also looking to trade these BTC derivatives.
Key advantages of BTC options include the management of price risk and downside protection. Traders may also save on potential margin offsets between futures and options.
Institutional interest revving up?
Before the CME launch, JPMorgan Chase strategists led by Nikolaos Panigirtzoglou noted that there had been a notable jump in the open interest in CME’s BTC futures contract since end-December. OI has moved up 69% since that date, with a significant jump in the number of big-ticket OI holders. This appeared to be advance warning of institutional interest, JPM said. “This unusually strong activity over the past few days likely reflects the high anticipation among market participants of the option contract.”
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