Mark Your Calendars: January 13, 2020

Get ready, crypto enthusiasts! The day that many have been waiting for is almost upon us. On January 13, 2020, the Chicago Mercantile Exchange (CME) Group plans to unveil options on Bitcoin futures, provided regulatory approval goes smoothly. It’s like the Super Bowl for crypto traders, and everyone’s got their popcorn ready.

The Nuts and Bolts of Bitcoin Futures

So, what exactly is a Bitcoin futures option? Well, CME Group has laid the groundwork for a futures contract that represents a hefty 5 BTC, quoted in U.S. dollars. This means if you’re feeling lucky and you think Bitcoin will skyrocket, you might just want to place your bets. The catch? There’s a block minimum of five contracts you’ll need to contend with.

How Options Work

When your options get exercised, you’ll find yourself in possession of an underlying cash-settled futures contract. In-the-money options will be automatically exercised into expiring cash-settled futures, which settle according to the CME CF Bitcoin Reference Rate. And let’s get this straight: that rate is announced with no room for ambiguity at 4:00 p.m. London time on the last Friday of the contract month.

CME Group’s Vision for BTC Futures Options

Back in September, CME Group hinted at this grand rollout, primarily aimed at helping institutions and professional traders manage their exposure to the wild world of spot market BTC. Tim McCourt, the global head of equity index and alternative investment products, stated that these new offerings would enable traders to hedge their BTC futures positions in a well-regulated environment—because who doesn’t love to play it safe in a volatile market?

Spotlight on Asia

Might Asia just become the wild west for BTC options? McCourt believes so! There’s a growing expectation for high demand in the Asian market when these options launch. Both traders and Bitcoin miners will likely flock to these tools, hoping to navigate their strategies better and keep those production costs at bay.

No Plans for Physical Bitcoin Contracts Yet

Hold your horses, though! While the excitement brews over BTC options, CME Group admits that they have no near-term plans to introduce physically-settled Bitcoin contracts. They seem content like a cat with a full bowl of kibble, focusing on the cash-settled future instead. So, crypto traders, keep your options open and your wallets ready!