FAQ: CME Options on Bitcoin Futures

Overview

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 transactions on CME 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
Minimum Price Fluctuation Regular Tick: $5 per bitcoin ($25 per contract) for premium > $25 per bitcoin ($125 per contract)

Reduced Tick:  $1 per bitcoin ($5 per contract) for premium at or below $25 per bitcoin ($125 per contract)
Trading Hours CME Globex: Sunday - Friday 6:00 p.m. - 5:00 p.m. ET (5:00 p.m. - 4:00 p.m. CT) with a 60-minute break each day beginning at 5:00 p.m. ET (4:00 p.m. CT)

CME ClearPort: 6:00 p.m. Sunday to 6:45 p.m. Friday ET (5:00 p.m. - 5:45 p.m. CT) with a 15-minute maintenance window between 6:45 p.m. - 7:00 p.m. ET (5:45 p.m. - 6:00 p.m. CT) Monday - Thursday.
Product Code BTC
Listing Cycle Nearest two Decembers and nearest 6 consecutive months. If nearest six consecutive months comprise nearest December, one additional deferred December will be listed. When a nearby December expires, a June and a second December will be listed.
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 All contract months:
  • Persistent strikes of: $500,000; $100,000; $50,000; $10,000; $5,000; $1,000
  • If bitcoin> $100K: strike increment = $5,000
  • If bitcoin <= $100K: strike increment = $1,000
Four nearest contract months:
  • If bitcoin <= $10,000: Strike Increment = $500
Three nearest contract months:
  • If bitcoin <= $5,000: Strike Increment = $100
Two nearest contract months:
  • If bitcoin <= $2,500: Strike Increment = $50
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 establish a spot and futures position. For spot position holders, an EFP can swap a long spot position with futures exposure that can be rolled forward. 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.


New Bitcoin options strike listing rules

What is changing?

The strike interval listing logic is being revised to reduce the number of listed strikes whereby strike granularity is contingent not only on time until expiration, but also on the price of bitcoin.

Why are these changes being undertaken now?

Bitcoin prices are significantly higher than when strike listing rules were first generated. As of September 2021, many Bitcoin option expiries have $100 point granularity, resulting in many strikes with very similar profiles in terms of option Greek exposures – meaning there are many options with different strike prices, but nearly equivalent delta. 

Consolidation of strikes appropriate to the current price level, as well as future price levels, should result in increasing actionable liquidity for clients without any loss of choice or variety for risk management needs. Additionally, the resultant liquidity concentration should better enable clients to implement a wider variety of strategies, helping to build the Bitcoin option ecosystem at CME Group. 

When is the change effective?

The change is effective for trade date September 27, 2021 for all listed contract months. The March 2022 contract month will be the first contract month whereby the changes shall be fully incorporated. All subsequent contract listings will follow the new strike listing rules.

How does the Bitcoin options Strike listing approach differ from the Equity Index options products, such as E-mini S&P 500 options?

E-mini S&P 500 options approach strike granularity and listing ranges by evaluating time until expiration (35 days, 186 days, 366 days).  Based on this timeframe, differing strike granularities and listing ranges are generated. New Bitcoin options listing rules add a further level of precision, by additionally considering the price of the underlying asset itself.

What are the new strike intervals?

Bitcoin prices were divided into several ‘regimes’ to ensure that strike listing rules are appropriate for a variety of price/volatility environments.

  • All contract months:
    • Persistent strikes of: $500,000; $100,000; $50,000; $10,000; $5,000; $1,000
    • If bitcoin> $100K: strike increment = $5,000
    • If bitcoin <= $100K: strike increment = $1,000
  • Four nearest contract months:
    • If bitcoin <= $10,000: Strike Increment = $500
  • Three nearest contract months:
    • If bitcoin <= $5,000: Strike Increment = $100
  • Two nearest contract months:
    • If bitcoin <= $2,500: Strike Increment = $50

Will the strike listing percentage ranges also differ according to the underlying price of bitcoin?

No.  Bitcoin strikes will be listed symmetrically, 50% above and 50% below the prevailing underlying price.

Will user-defined instruments continue to be enabled?

Yes, user-defined instruments are still available, whereby traders can add a strike customized to their needs, at a 25-point interval.

Will this new listing approach affect the availability of any current strikes in existence, or have any effect on existing open interest?

No. All existing expiries and strikes will remain intact, and there will be no effect to current open interest of any Bitcoin options currently available. These changes will be implemented exclusively for new expiries and associated strikes.


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 clearing.riskmanagement@cmegroup.com.


Additional Information

What are the fees?

Fees can be found on the CME Fee Schedule.

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.

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 see prices for options on Bitcoin futures?

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

Learn more about CME Direct

Where can I find block liquidity provider contact information?

View Bitcoin block liquidity provider contact information here.

To learn more about Bitcoin options, visit cmegroup.com/bitcoin.


CF Benchmarks 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.

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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