CME to add options trading for Bitcoin and expand Bitcoin futures

By Will Heasman

The Chicago Mercantile Exchange (CME), the world’s largest options and futures exchange,  announced today that its thriving bitcoin futures contracts will include options as early as 2020, according to a press release. The new offering is "pending regulatory review."

Options are a more conservative way of trading that's similar to futures trading. Tim McCourt, an executive at CME, said the inclusion of options is based on the burgeoning demand and growth of the market.

"These new products are designed to help institutions and professional traders to manage spot market bitcoin exposure, as well as hedge Bitcoin futures positions in a regulated exchange environment,” he added.

This extension of bitcoin futures doesn't come as too much of a surprise. Since launching in 2017, the cash-settled contracts have proliferated in popularity. After a drop in volume during 2018, the futures grew to see a daily trading volume of $350 million over the year.

Upping the stakes

On top of this, CME wants to expand its existing Bitcoin futures offering.

Last week, Nasdaq reported that CME had petitioned its regulator, the Commodity Futures Trading Commission (CTFC), to double the limit on open positions—the amount a person can trade—on Bitcoin futures contracts.

Currently investors can open 1,000 contracts, to the tune of 5,000 bitcoins ($51 million) in total, per month. The move would see that rise to 2,000 contracts, which would mean 10,000 bitcoins, worth $102 million.

This may be in response to new competition in the institutional-grade Bitcoin futures market.

In three days, the highly-anticipated Bakkt, will finally launch. Though it's been a long time coming, the brainchild of the Intercontinental Exchange will start trading, bringing with it an abundance of institutional-grade instruments including bitcoin custodial services and physically-settled BTC futures contracts—where the traders receive bitcoins rather than the equivalent in US dollars—threatening to outmatch the CME's own offering.

Let the games begin.

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