Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.
CME is preparing to introduce options for its micro-sized Bitcoin and Ethereum futures representing only 10% of the size of the respective cryptocurrencies.
One of the world’s biggest derivatives exchanges – Chicago Mercantile Exchange Group – plans to launch trading for micro Bitcoin futures and options. On Tuesday, March 1, the CME Group announced that post regulatory approval it is ready to launch micro-sized options contracts for the existing Bitcoin and Ethereum futures, ahead of this month on March 28.
Micro Bitcoin and Ethereum Options by CME
These future options will represent only 10% of the size of the respective cryptocurrencies. The goal is basically encouraging wider market participation. This includes institutions as well as individual sophisticated traders.
The launch of the options contract will come within two years after CME launched its options trading product in January 2020. CME said that the micro-sized BTC and ETH options will allow clients to maintain a long as well as short-term view. This will include a choice of weekly options expiry for Monday, Wednesday, and Friday. Speaking on this product launch, Tim McCourt, Global Head of Equity and FX Products, CME Group said:
“We have worked closely with clients and the broader industry to establish robust and liquid cryptocurrency futures and options markets at CME Group. At less than a year old, nearly 5.2 million combined Micro Bitcoin and Micro Ether futures contracts have changed hands. Building on the strength and liquidity of the underlying contracts, our micro-sized options will enable traders of all sizes to efficiently hedge market-moving events with greater precision and flexibility or fine-tune their cryptocurrency market exposure.”
CME and Its Crypto Products
The CME Group has been one of the first institutional players offering crypto derivative products in the market. The CME Group launched its Bitcoin futures in December 2017 which has seen healthy demand from institutional players.
CME’s Bitcoin futures are also cash-settled, making traders don’t need to hold any physical BTC which eliminates the custodial issues. With its new product line, CME has been keen on expanding market participation in the crypto ecosystem. The micro-size crypto futures suggest a move in this direction.
However, the company’s products surround the two biggest cryptocurrencies. CME recently launched the Ether micro futures in December 2021. Both, the micro Bitcoin and Ethereum futures contracts are sized at 0.1 BTC and 0.1 ETH respectively.
As per CME, the minimum block threshold for options is 10 contracts for micro BTC and 100 contracts for micro ETH. The announcement comes just on the days when Bitcoin and Ethereum have registered major trend reversals.