CME Bitcoin Options Volume Shows Early Market Traction

Day one volume trumps ICE's Bakkt product.

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The CME’s options launch could channel an influx of institutional speculators to crypto.

Crypto Derivatives on the Rise

On Jan. 13, 2020, the CME announced the launch of its Bitcoin options contracts on the CME Globex platform. The first trades on the platform thus far have been the purchase of one call option on Bitcoin with strike prices of $8,500, $9,500, and $10,000.

Bitcoin derivative liquidity surged throughout 2019 with no signs of stopping in 2020. Futures and perpetual swap contracts are still the instrument of choice for more speculators. 

However, as the broader cryptocurrency sector attracts, regulated options are expected to boom as more sophisticated speculators jump into the fray.

Cryptocurrency exchange Deribit is currently the most liquid Bitcoin options market, boasting over 80% in options volume at the time of press. Speculators with significant capital to deploy still prefer to do so over regulated exchanges, giving CME and Bakkt an edge. 

Chris Zuehlke, the global head of Cumberland, a subsidiary of DRW and market maker for CME Bitcoin markets, is optimistic about the institutionalization of cryptocurrency derivatives. 

He told Crypto Briefing:

“As one of the largest liquidity providers in the space, we know there is demand for more traditional risk management tools to support institutional entry into the space.”

He further added:

“We believe the ability to purchase options on a regulated platform, which offers traditional margin requirements, clearing capabilities and FCMs, provides another opportunity for more traditional investors to interact with the crypto markets.”

The institutional facing derivatives market is currently cornered by CME and Bakkt as they are the only platforms with liquidity and regulated products. Bakkt, despite a one month headstart, has been struggling to see traction in their options market. 

The Block reported that CME’s inaugural volume has already trumped that of Bakkt.

Retail demand for options seems to be growing in tandem as Binance-backed FTX also announces the introduction of their crypto options market. Options offer more intricacy with risk management and hedged positions, giving them precedence in traditional markets with institutions and individual traders.