FAQ: CME Options on Bitcoin Futures

Launch & Overview

When will CME Group launch options on Bitcoin futures contracts?

Following the maturation and success of our bitcoin futures introduced in December 2017 and in response to growing customer demand for additional regulated bitcoin derivative products, we are launching Options on Bitcoin futures on January 13, 2020.

What is the relationship between options on Bitcoin futures and Bitcoin futures?

CME options on bitcoin futures give the buyer of a call/put the right to buy/sell one bitcoin futures contract at a specified strike price at some future date. Upon termination of trading, in-the-money options, expire into 1 bitcoin futures contract which immediately cash settles to the CME CF Bitcoin Reference Rate (BRR).

How can I access and trade this product?

Options on Bitcoin futures will be available to trade on CME Globex as well as via ex-pit transactions on CME Clearport

Will there be a test environment?

Yes, beginning on December 9, 2019 Options on BTC Futures will be available for test in New Release on CME Globex and Clearport.


Product Details

What are the contract specifications?

Contract Unit

1 BTC futures contract (which represents 5 bitcoin)

Price Quotation

U.S. dollars per one bitcoin

Trading Hours

CME Globex and CME Clearport: 5:00 p.m. – 4:00 p.m. CT Sunday – Friday

Product Code

BTC

Listing Cycle

The listing cycle will mirror that of the underlying Bitcoin futures. Subject to review and revision.

Exercise Procedure

European (with no contrarian instructions)

Termination of Trading

Last Day of Trading is the last Friday of contract month.

Trading in expiring futures terminates at 4:00 p.m. London time on Last Day of Trading.

Strike Interval

10,000 index point integer multiples: up to 600% of the prior day’s settlement price on the underlying future contract or prior day’s underlying index reference price upon initial listing of the future.

1,000 index point integer multiples:  up to 400% of the prior day’s settlement price on the underlying future contract or prior day’s underlying index reference price upon initial listing of the future.

500 index point integer multiples:  50% to 150% of the prior day’s settlement price on the underlying future contract once the underlying future becomes the second nearest month

100 index point integer multiples:  80% to 110% of the prior day’s settlement price on the underlying future contract once the underlying future becomes the second nearest month

50 index point integer multiples:  80% to 110% of the prior day’s settlement price on the underlying future contract once the underlying future becomes the second nearest month and the underlying future contract price is below 5,000 index points

Block Minimum

5 contracts

Settlement at Expiration

Option exercise results in a position in the underlying cash-settled futures contract. In-the-money options are automatically exercised into expiring cash-settled futures, which settle to the CME CF Bitcoin Reference Rate (BRR) at 4:00 p.m. London time on the last Friday of the contract month.

Are Options on Bitcoin futures available for trading 24/7?

Yes, Options on Bitcoin futures can be transacted 24/7. Bilateral transactions such as block trades, pursuant to Rule 526, and EFRPs (Exchange for Related Position), pursuant to Rule 538, may be negotiated/executed 24/7 and must be submitted for clearing during the appropriate clearing session. Globex, our electronic platform, is available 23 hours per day beginning Sunday evening at 5∶00pm CT and ending at 4∶00pm CT Friday afternoon

How will options on Bitcoin futures daily settlement price be determined?

CME Group staff determines the daily settlements for the out of the money options based on market activity throughout the day, on all venues (including, but not limited to, CME Globex, CME ClearPort, CME Direct and the trading floor, as applicable). Once the underlying futures have been settled the implied volatility skews will be used in conjunction with the futures settlement price to derive settlement prices for the options.

In-the-money options are settled automatically by the Exchange in accordance with the put-call parity equation, considering the appropriate cost of carry.

The cost of carry is rounded to the nearest minimum increment of the underlying futures contract.  For all products, the interest rate used will be the rate on the Overnight Index Swap (OIS) curve corresponding with the expiration date for each contract.

How will options on Bitcoin futures final settlement price be determined?

The final settlement value will be based on the CME CF Bitcoin Reference Rate (BRR) at 4:00 p.m. London time on the expiration day of the futures contract. 

Into which asset class will options on Bitcoin futures be classified?

Options on Bitcoin futures will be classified under Equity Index and Alternative Products. Any questions related to the launch of Options on Bitcoin futures can be directed to equities@cmegroup.com

Through which market data channel will these products be available?

Options on Bitcoin futures market data will be available on MDP Channel 319.

Is there an option to take physical delivery of bitcoin?

Options on Bitcoin futures expire into expire into 1 Bitcoin futures contract which immediately cash settles to the CME CF Bitcoin Reference Rate (BRR). Market participants desiring physical bitcoin delivery may enter into an Exchange for Related Positions (EFRPs) transaction– a privately negotiated trade between two counterparties allowing them to simultaneously transfer a future or options position for an equivalent spot market position or vice versa. EFRP transactions are governed by Exchange Rule 538.

Are options on Bitcoin futures block eligible?

Yes, Options on Bitcoin Futures are block eligible and are governed by Exchange Rule 526. The minimum trade size is 5 contracts.


CME CF Bitcoin Reference Rate (BRR)

What is the CME CF Bitcoin Reference Rate (BRR)?

Designed by CME Group and CF Benchmarks Ltd, around the IOSCO Principles for Financial Benchmarks, the BRR is a daily reference rate of the U.S. Dollar price of one bitcoin as of 4:00 p.m. London time. The BRR reflects bitcoin trading activity on Constituent Exchanges that contribute transactional information for the rate’s calculation. The BRR is geared towards resilience and replicability.

Learn more about the BRR

How is the BRR calculated?

The BRR is calculated based on the relevant bitcoin transactions on all Constituent Exchanges between 3:00 p.m. and 4:00 p.m. London time. The price and size of each relevant transaction is recorded and added to a list which is portioned into 12 equally-weighted time intervals of 5 minutes each. For each partition, a volume-weighted median trade price is calculated from the trade prices and sizes of the relevant transactions across all the Constituent Exchanges. The BRR is then determined by taking an equally-weighted average of the volume-weighted medians of all partitions.

View BRR Methodology

Where can I find more information on the BRR Constituent Exchanges?

Are Constituent Exchanges KYC/AML (Know Your Client/Anti-Money Laundering) compliant?

Although the Constituent Exchanges are not presently regulated as securities or derivatives markets, each exchange proactively institutes KYC/AML policies.


Margin Details

How are the margin requirements for options on Bitcoin futures calculated?

CME Clearing uses a SPAN model to determine the margin required to cover at least 99% of anticipated price changes for a product over a given liquidation period. A vast array of inputs are considered including, historic and forward looking volatility measures, product liquidity and historically observed correlations, among other things.

Will margin offsets be available?

Yes, market participants be able to net margins between CME bitcoin options and CME bitcoin futures.

Where will Bitcoin options fall in CME Clearing’s guaranty fund?

CME options on bitcoin futures will fall into CME’s base futures & options guaranty fund, as any newly listed contract.

For all other inquiries regarding margins or CME Clearing’s approach to risk management, please contact Lee Betsill (lee.betsill@cmegroup.com) or Matt Waldis (matthew.waldis@cmegroup.com).


Additional Information

What are the fees?

Fees for Options on Bitcoin Futures will match the Bitcoin Futures according to the CME Fee Schedule.

CME will introduce a 50% market wide fee discount on all Options on Bitcoin Futures transactions at launch.

In which division will options on Bitcoin futures reside?

Options on Bitcoin futures will be listed on CME and will reside in the IOM Division.

Will there be on-screen market makers for options on bitcoin futures?

Yes, CME Group will introduce a market maker program to support the on-screen market development of options on bitcoin futures.

How can I access CME Globex?

To access CME Globex, you must have a relationship with a CME Clearing Member Firm.

Learn more about connecting to CME Globex

Where can I see options analytics?

Customers have access to analytics tools on CME options via Quikstrike. Please use this link to access available tools.

Where can I find more information on the options on Bitcoin futures launch?

Visit www.cmegroup.com/bitcoinfutures for the latest information on Bitcoin options on the upcoming launch of Bitcoin options.*

*Pending internal and regulator approval

Where can I see prices for options on Bitcoin futures?

Delayed quotes will be available on cmegroup.com. You can also access quotes through major quote vendors.

Where can I find block liquidity provider contact information?

Visit cmegroup.com for the block liquidity provider contact information.


Crypto Facilities Ltd., Chicago Mercantile Exchange Inc. (including each of their respective subsidiaries and affiliates), their respective officers, directors, employees, agents, consultants and licensors shall not be liable to any person for any losses, damages, costs or expenses (including, but not limited to, loss of profits, loss of use, and direct or indirect, incidental, consequential or punitive damages), arising from any errors or inaccuracies made in connection with the calculation or distribution of the CME CF Cryptocurrency Indices. The foregoing limitation of liability shall apply whether a claim arises in contract, tort, negligence, strict liability, contribution or otherwise and whether the claim is brought directly or as a third party claim. Furthermore, there is no guarantee the continuity of the composition of the CME CF Cryptocurrency Indices, nor the continuity of their calculation, nor the continuity of their dissemination.

Neither futures trading nor swaps trading are suitable for all investors, and each involves the risk of loss. Swaps trading should only be undertaken by investors who are Eligible Contract Participants (ECPs) within the meaning of Section 1a(18) of the Commodity Exchange Act. Futures and swaps each  are  leveraged  investments  and,  because only a percentage of a contract’s value is required to trade, it is possible to lose more than the amount of money deposited for either a futures or swaps position.  Therefore, traders should only use funds that they can   afford to lose without affecting their lifestyles and only a portion of those funds should be devoted to any one trade because traders cannot expect to profit on every trade.

CME Group, the Globe Logo, CME, Globex, E-Mini, CME Direct, CME DataMine and Chicago Mercantile Exchange are trademarks of Chicago Mercantile Exchange Inc. CBOT is a trademark of the Board of Trade of the City of Chicago, Inc. NYMEX is a trademark of New York Mercantile Exchange, Inc. COMEX is a trademark of Commodity Exchange, Inc. All other trademarks are the property of their respective owners.

The information within this communication has been compiled by CME Group for general purposes only. CME Group assumes no responsibility for any errors or omissions. Additionally, all examples in this communication are hypothetical situations, used for explanation purposes only, and should not be considered investment advice or the results of actual market experience. All matters pertaining to rules and specifications herein are made subject to and superseded by official CME, CBOT, NYMEX and COMEX rules. Current rules should be consulted in all cases concerning contract specifications.

Copyright © 2019 CME Group Inc. All rights reserved

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Bitcoin Futures

Learn more about Bitcoin futures, including contract specs, launch date and the underlying CME CF Bitcoin Reference Rate (BRR).

Learn More