CME Group, a derivatives exchange, is set to offer options on micro bitcoin and ether futures from March 28. This is an effort to give traders exposure to instruments with nominal capital. The options contracts will be about one-tenth the size of the underlying tokens.
CME had introduced bitcoin futures in 2020 but it began offering bitcoin futures contracts in 2017. It launched cash-settled micro bitcoin futures contracts worth one-tenth of one bitcoin in 2021. Moreover, the derivatives marketplace added ether futures in November.
It should be noted that futures require the buyer to purchase an asset at a specific date, whereas options empower the investor with the right to buy or sell an asset before the contract expires.
Tim McCourt, the global head of equity and foreign exchange products at CME Group, revealed that about 5.2 million micro bitcoin and micro ether future contracts have changed hands in less than a year. He said the micro-sized options will enable traders irrespective of their size to efficiently hedge market-moving events with greater precision and flexibility. It will enhance their cryptocurrency market exposure.
McCourt pointed out that the launch will feature Monday, Wednesday and Friday as traders favor short-dated options to manage risk. Genesis Global Trading, Cumberland and Akuna Digital Assets will provide liquidity. John Harris, the CEO of Akuna Digital Assets, believes that options on the contracts will allow existing market participants greater flexibility.
The launch follows CME Group introducing two new reference rates for bitcoin and ether Monday that provide a daily reference rate of the US dollar price of teh two digital assets.