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Bitcoin Options Coming to the US; CME Debuts New Derivative in Q1

After months of lobbying, Bitcoin options are soon to be legal in the United States. CME Group today said it would launch options on its Bitcoin futures contracts within the first months of 2020, potentially becoming the first US exchange to do so.

The derivatives giant did not rule out the technical specifications of its newest cryptocurrency derivatives, pending regulatory review, and is assessing its approach for how it plans to continue.

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The major US exchange paved the way for bitcoin options earlier this month as compared to rival Cboe it hasn’t had a change of heart.

With extra regulatory safeguards, CME Group introduced Bitcoin futures in December 2017, marking a major step in the path to legitimate the cryptocurrency.

The Chicago-based venue was not the only exchange to try to capitalize on the crypto frenzy as Cboe pioneered with its own cash-settled bitcoin contracts.  However, Cboe decided earlier this year to discontinue its bitcoin futures trading activities. CME, on the other hand, pressed onward with new crypto products.

Renewed interest in crypto trading

Both futures and options are a way for investors to bet on the trends of bitcoin price without having to actually hold the digital currency, which skirts regulatory and custodian issues. However, futures are in general riskier than options as the only financial liability for the latter is the premium paid at the purchase time. Futures contracts, on the other hand, involve maximum liability.

The move by CME highlights renewed enthusiasm for bitcoin after an all-out mania led by investors in 2017 cooled in 2018 as prices crashed down by 80 percent. Cryptocurrencies have tallied a dramatic rise in price in the last few months, providing fresh optimism.

Most recently, CME posted record numbers in August for its bitcoin futures trading, with YTD volumes averaging 7,237 contracts or $370 million per day, which is a 132% increase from the same period last year.

“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, CME Group Global Head of Equity Index and Alternative Investment Products.


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