CME Group is set to introduce options on Bitcoin Friday Futures, providing traders with more risk management tools and building on the success of its previous launch.
The Chicago Mercantile Exchange (CME) Group has announced that it will introduce options on Bitcoin Friday Futures (BFF) starting on February 24, pending regulatory approval. This move is expected to provide traders with more risk management tools and build on the success of BFF.
CME Group is a global financial market operating in Chicago, Illinois.
It was established in 1898 and is one of the largest derivatives exchanges worldwide.
CME Group offers futures and options trading on various assets, including commodities, currencies, interest rates, and equity indexes.
The exchange has over 3,000 listed contracts and operates 24 hours a day, five days a week.
According to the CME Group's 2020 annual report, it had $1.4 trillion in average daily trading volume.
A Successful Launch
BFF was CME Group’s most successful cryptocurrency launch, with over 775,000 contracts traded since its launch on September 29. The average daily volume was 9,700 contracts, and a significant portion (44%) of contracts were traded during non-U.S. hours. The total volume racked up by BFF is $1.63 billion.
New Options for Traders
The new options will be financially settled and will expire every day of the business week, from Monday to Friday. According to Giovanni Vicioso, CME Group Global Head of Cryptocurrency Products, these contracts will offer smaller contract sizes and daily expirations, providing investors with a more efficient toolset to adjust their bitcoin exposure.
The Chicago Mercantile Exchange (CME) Group offers a range of cryptocurrency products, including futures contracts and options on Bitcoin.
The CME's Bitcoin futures contract is based on the price of one Bitcoin and allows investors to bet on the future price of the cryptocurrency.
The CME also offers micro Bitcoin futures, which are one-twentieth the size of a standard contract.
These products provide institutional investors with a regulated platform to trade cryptocurrencies.
‘We are pleased to offer these new options that provide traders with even greater precision to manage short-term bitcoin price risk,’ said Vicioso. ‘The smaller size of these contracts, along with daily expiries, offer market participants a capital-efficient toolset to effectively adjust their bitcoin exposure.’
Bitcoin price risk management involves strategies to mitigate potential losses due to price fluctuations.
Volatility is a key characteristic of cryptocurrencies, making it essential for investors to employ techniques such as dollar-cost averaging and stop-loss orders.
Market analysis and technical indicators can also help identify trends and predict price movements.
Furthermore, diversification by investing in other assets or using hedging mechanisms like futures contracts can reduce exposure to Bitcoin's price volatility.
Enhanced Risk Management
The introduction of options on BFF is expected to enhance the risk management capabilities of traders. By providing more precise tools for managing short-term bitcoin price risk, CME Group aims to cater to the evolving needs of its customers.
