The Chicago Mercantile Exchange (CME) is launching its bitcoin options trading today. The offering will add to its current bitcoin futures trading offering, which saw $1.7B in value traded on one day in June, last year.
At Coindesk Invest, back in November, 2018, Tim McCourt, global head of equity index and alternative investment products at CME Group, told Decrypt. “Options has been a product that’s been in high demand from customers ever since we launched futures back in December, 2017.
On the launch, he said, “We’re certainly excited to see what happens. Folks are excited about it and we’re happy to bring this new risk management tool to the market.”
McCourt explained that the demand was coming from a few different types of traders. He said that lots of firms who use the futures contract are looking to deploy strategies specific to option trading. At the same time, there are already a lot of option trading firms who use CME, which are looking to trade bitcoin, he explained.
“It allows people to precisely manage the price risk associated with Bitcoin. You can deploy overriding strategies by selling calls, you can buy downside protection. These are things you can’t necessarily do with a linear one delta future,” he said, adding, “Lots of people are looking to deploy similar benefits and use cases for Bitcoin that they’re doing for other asset classes.”
Trading volumes start building
Traders are already pushing up trading volumes of the current Bitcoin futures trading offering in anticipation of today's launch. According to Bloomberg, citing analysis from JP Morgan, the launch of the options was preceded by a spike in trading volume.
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Nikolaos Panigirtzoglou, lead strategist at JP Morgan, noted that in the lead up to the launch there has been "a steep increase in the activity of the underlying CME futures contract,” adding open that interest had increased 69% since the end of last year.
“This unusually strong activity over the past few days likely reflects the high anticipation among market participants of the option contract,” Panigirtzoglou remarked.
But, as Bitcoin struggles to hold onto $8,000, will the added volume help to keep its price afloat, or push it deeper down?