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The recent buzzing news in the gamut of cryptocurrency is the CME’s announcement of launching plans of options trading facility on its bitcoin futures.
CME, which is the world’s largest futures exchange, has been keeping the gamut of cryptocurrencies in the spotlight since 2017.
The Group’s announcement of launching options on its Bitcoin futures contracts in Q1 2020, which is now pending owing to the regulatory review, is buzzing news for now.
On the back of it, CME today has divulged the specifications of preliminary options contracts, which is most likely to commence soon after regulatory approval, probably in the first quarter of 2020.
Let’s now quickly glance at the ‘Preliminary Contract Specifications.’
Contract Unit: 1 Bitcoin Futures contract (which represents 5 bitcoin)
Price Quotation: U.S. dollars per one bitcoin
Minimum Price Fluctuation: Regular Tick: 5 index points ($25.00) for premium > 25 index points
Reduced Tick: 1 index point ($5.00) for premium at or below 25 index points
Trading Hours: CME Globex and CME ClearPort: 5:00pm to 4:00pm CT Sunday-Friday
Listing Cycle: The listing cycle will mirror that of the BTC futures. Subject to review and revision
Exercise Procedure: European style (with no contrarian instructions)
Expiry Day: Last day of trading is the last Friday of contract month. Trading in expiring futures terminates at 4:00 p.m. London time on last day of Trading.
Lot size: 5 contracts
Settlement at Expiration: Option exercise results in a position in the underlying cash-settled futures contract. In-the-money options are automatically exercised into expiring cash-settled futures, which settle to the CME CF Bitcoin Reference Rate (BRR) at 4:00 p.m. London time on the last Friday of the contract month.
CME’s latest derivative would be priced-in contemplating the prevailing ‘CME Bitcoin Reference Rate’, that is an index based on the pricing data from some renowned cryptocurrency exchanges, such as, Coinbase, Bitstamp, Kraken, Gemini, and itBit.
The settlement takes place into the CME Bitcoin futures contract which trades under the ticker BTC and equals five bitcoins. Courtesy: CME sources
