Exchange provider CME Group expects bitcoin options to be a hit with Asian cryptocurrency traders, miners
- Slated for launch in the first quarter 2020, the new bitcoin options should prove as popular as futures contracts, says CME Group’s Tim McCourt
- Bitcoin price has more than doubled this year, having plunged 40 per cent from a peak in June; options could help hedge against volatility
CME Group said it expects the upcoming launch of options on bitcoin futures contracts to draw demand from cryptocurrency miners and traders in Asia.
The US futures exchange is aiming to launch the new crypto-derivative product during the first quarter of 2020.
Tim McCourt, CME Group’s global head of equity products and alternative investments, said he expects the new contracts to prove as popular as bitcoin futures, which were launched almost two years ago. As much as half of trading volume for futures is accounted for by Asian and European participants.
McCourt said trading has picked up recently for the bitcoin futures. On May 13, a record 34,000 futures contracts were traded, worth US$1.3 billion, and equivalent to 170,000 bitcoin.
Now with options on futures, traders will have the ability to more precisely gain exposure to or manage the price risks of bitcoin.
“While futures give you a one-for-one exposure, whereby the movement of the underlying bitcoin translates directly to a specific dollar value per contract, an option gives you varying strike-price levels and can give you either downside protection, or upside exposure at a fraction of the underlying [assets’s] price,” said McCourt.