The Chicago Mercantile Exchange (CME Group) announced the launch of Bitcoin options in the first quarter of next year.
CME first launched settlement Bitcoin futures contracts in December 2017, simultaneously with the Chicago Options Exchange (CBOE), however, in March CBOE abandoned bitcoin futures, motivating its decision with the need to revise its approach to working with a digital asset.
In a statement on Friday, CME said that the launch of Bitcoin options aims to provide customers with “additional tools for accurate hedging and trading.” The launch is pending regulatory approval. Tim McCourt, head of stock index and alternative investment products at CME Group, said:
Based on the growing customer demand and steady growth in our bitcoin futures market, we believe that the launch of options will provide our customers with additional flexibility in trading and hedging price risks in bitcoin.
Options and futures are in many ways similar financial instruments, but have some fundamental differences. If the buyer is obliged to purchase (or sell) an asset upon the expiration of the contract when the transaction with the futures, the option buyer receives the right, but not the obligation, to buy or sell the asset at a predetermined price at a time specified in the contract in the future. In this case, the seller of the option is obligated to respectively sell the asset or buy it from the buyer of the option in accordance with its terms.
On Monday, September 23, CME will have a new competitor – Intercontinental Exchange and its subsidiary Bakkt, which will launch their new futures contracts. However, unlike CME settlement futures contracts, Bakkt will offer deliverable futures, which means that customers will receive bitcoins instead of their value in dollar terms.