The world’s largest financial derivatives exchange, CME, plans on launching micro options for Bitcoin and Ethereum at the end of the month. This follows their successful launch of micro futures, which have resulted in a substantial uptick in trading volume.
CME Group announced that the contracts would represent one-tenth of each cryptocurrency and be open not only to institutional but also retail traders, for whom the instruments were designed. Pending a regulatory review, the company intends to launch the micro options during the last week of March.
Options contracts are used by traders and investors for different strategies. Investors will often buy options as insurance, in order to be able to buy or sell a stock at a certain price. More fast-paced traders can also earn by essentially buying out those insurance contracts and taking on the risk for a premium.
Although cryptocurrencies have started to become mainstream in the past year, their volatility has remained. This makes them ideal for such financial derivatives, to protect against the wild price swings. Existing options products are mainly traded on crypto exchange Deribit as of now, but CME might push for a larger market share.
Following the declining volume in its Bitcoin futures during March last year, CME launched micro versions of its Bitcoin and Ethereum futures. It had done this in a similar bid to draw in retail attention. Roughly one tenth the size of one bitcoin, the smaller contract size enables traders of all sizes – from institutions to active retail traders – to get exposure to bitcoin prices, or hedge their spot bitcoin positions. Following the release of these micro crypto futures, CME reported in its second quarter financial results a revenue of $1.2 billion and an average daily volume growth of 5%, which it attributed to the micro futures.
“We have built a $100 million a year business that didn’t exist just a couple of years ago with our micro product.” – CME Group CFO John William