One of the world’s largest derivatives exchange groups, Chicago Mercantile, intends to start trading options on micro Bitcoin and Ether futures. On Tuesday, it announced that it plans to roll out the options by 28 March.
The new options contracts are set to be one-tenth of their respective underlying tokens in size. CME introduced bitcoin futures contracts, sized at five bitcoin, in 2020.
Per the exchange, the novel launch would offer market participants – right from institutions to sophisticated, active, individual traders – more ways to manage their exposure to Bitcoin and Ethereum.
These contracts will join the same league of the existing micro BTC and micro ETH futures that were launched individually in May and December last year.
Traders usually favor short-dated options to manage risk. To cater to the same, the novel launch will feature Monday, Wednesday, and Friday weekly expiries, along with the monthly, for micro crypto options.
Futures typically require the buyer to purchase an asset at a certain date, while options give investors the right, but not the obligation, to buy or sell an asset before the contract expires.
The number talk
As per Tim McCourt, CME Group’s global head of equity and foreign exchange products, 5.2 million micro Bitcoin and micro Ether futures contracts have changed hands in less than a year.
His statement further noted,
“We have worked closely with clients and the broader industry to establish robust and liquid cryptocurrency futures and options markets at CME Group.”
With respect to the latest offering, he added,
“Building on the strength and liquidity of the underlying contracts, our micro-sized options will enable traders of all sizes to efficiently hedge market-moving events with greater precision and flexibility or fine-tune their cryptocurrency market exposure.”
Back in the first week of February, CME released its financial results. Per the same, the exchange reported 2021’s Q4 average daily volume to be 20.5 million contracts, up 26% from 2020’s Q4.
Strategic move?
Over the past few months, institutional investors have started outrightly experimenting with different crypto investment vehicles. Until recently, Grayscale’s trusts were the go-to option for such market players. But now, with the launch of other crypto-centric investment products, institutions are washing their hands away from plain sailing products and are instead eying even more sophisticated ones like ETFs. In effect, grey-haired products are now gradually fading into irrelevancy.
In fact, gone are the days when every big company craved to directly expose themselves to crypto assets. Data from Bitcoin Treasuries highlighted that not many new companies have directly added the king-coin to their balance sheets. The list still features companies like MicroStrategy, Tesla, Square, and Coinbase who made their initial purchases quite some time back.
Given the evolving landscape and the intense competition in the space, CME trying to mix-match futures and options and provide market participants a novel exposure method to the OG coins indeed seems to be a well-thought-out move by the group.