CME Takes Its Bitcoin Options Live, Competing With ICE’s Bakkt

Options on CME’s bitcoin futures contracts launched on the CME Globex around 15:00 UTC Monday. Each contract, quoted in U.S. dollars, represents five bitcoin and is cleared centrally to avoid counterparty risk. CME relies on trade flow data from several of the large bitcoin exchanges to accurately track bitcoin’s price.

Bitcoin derivatives have been available on multiple cryptocurrency exchanges since at least 2014, but CME was one of the first platforms to offer investors regulated products when it first launched its cash-settled bitcoin futures in December 2017.

Bitcoin options had a strong start to 2019. Last week, daily volumes surged to surpass $90 million by Friday, according to data collected from analytics firm Skew. Approximately 95 percent of all trades last year took place on the Dutch-based exchange Deribit, which announced Thursday it was moving its operations to Panama citing regulatory concerns.

The Binance-backed derivatives platform FTX announced Sunday it had launched its own bitcoin options contracts. Although unavailable to U.S. traders, volumes reportedly hit $1 million in the first two hours of trading, according to CEO Sam Bankman-Fried.

CME revealed plans to launch bitcoin options days before the launch of Bakkt’s bitcoin futures in September. The rival platform, which is owned by the Intercontinental Exchange (ICE), released its own options and cash-settled contracts in early December. CME has previously said it does not have any current plans to launch physically-delivered futures.

In the past the market has had a mixed response to bitcoin derivatives. Bitcoin hit its all-time high of near $20,000 soon after the original release of CME futures, but it plunged nearly $2,000 following the launch of Bakkt’s futures contracts, according to CoinDesk’s Bitcoin Price Index.

In a note Friday, JPMorgan’s managing director for global market strategy, Nikolaos Panigirtzoglou, said the signs suggested institutional investors were getting ready for CME’s launch. Data from the exchange show open interest for bitcoin futures increased 69 percent from year-end until last Friday, hitting a seven-month high.

“This unusually strong activity over the past few days likely reflects the high anticipation among market participants of the option contract,” Panigirtzoglou wrote, as reported by Bloomberg.

So far, bitcoin’s price has not moved on the news of the options launch.