CME Bitcoin Options Go Live, Receives Massive Response on Debut

U.S.-based financial derivatives platform - Chicago Mercantile Exchange (CME) - launched its Bitcoin Options Contract earlier this week on Monday, January 13, 2020.

The CME Group was the first one to launch Bitcoin Futures Contracts in the market back in December 2017 when Bitcoin was trading at its all-time high. Citing a huge investor demand, the CME Group has finally started the live trading for its Bitcoin Options contracts.

The official announcement from CME reads: “Options on Bitcoin futures offer greater capital efficiencies and a new way to manage bitcoin exposure.”

CME Option on Bitcoin futures will allow the buyer of call or put the facility to buy or sell the Bitcoin futures contracts at a specified price on a future date.

Both these financial products - futures and options give investors the option to hedge current investments, however, they are not the same. The futures contract mandates an buyer to purchase the shares and the seller to sell the shares at a specific future date of expiry, unless the contract is closed beforehand.

On the other hand, options doesn’t oblige the investor to buy or sell the shares at a specific time in future until the contract is active. The CME Bitcoin options will directly compete against Bakkt’s Bitcoin options launched last month in December 2019.

JPMorgan's managing director for global market strategy, Nikolaos Panigirtzoglou, said that the institutional investors were already prepared for the CME launch. As reported by Bloomberg, the director wrote: "This unusually strong activity over the past few days likely reflects the high anticipation among market participants of the option contract”.

The CME Bitcoin Options saw a massive response on the very first day. CME did a total of 55 options contracts, worth 275 Bitcoin. Each option is on one future, and one future is worth five Bitcoin at CME, so a little over $2 million in terms of notional value.