Chicago Mercantile Exchange to Launch Bitcoin Options in Early 2020
As the company explains, the decision to launch bitcoin options was dictated by a growing interest in cryptocurrencies and the demand of customers for tools to control access to Bitcoin. The launch of the tool will take place in early 2020.
Unlike futures, where both parties are required to fulfill the terms of the contract, the option gives its buyer the right, but not the obligation, to buy or sell the asset at a predetermined price at a certain point in the future. In this case, the option seller cannot refuse to fulfill the terms of the contract. He compensates for additional risks with the premium that the buyer gives him when concluding the contract.
“Based on increasing client demand and robust growth in our Bitcoin futures markets, we believe the launch of options will provide our clients with additional flexibility to trade and hedge their bitcoin price risk,” said Tim McCourt, global head of equity index and alternative investment products at CME.
Tim added: “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.”
Currently, Bitcoin futures contracts, which were launched at the end of 2017, are being traded on the CME platform. Opening options based on existing futures will require additional evaluation by the regulator.
Author: Marko Vidrih