- CME published the parameters of new instruments that will go live in the first quarter of 2020.
- The specifications are subject to regulatory approval.
Chicago Mercantile Exchange (CME) published the specifications of bitcoin options that are expected to be launched in the first quarter of 2020.
The new instruments will be based on CME CF Bitcoin Reference Rate (BRR). This is a reference bitcoin exchange rate against the US Dollar compiled from spot exchange rates obtained from Bitstamp, Coinbase, itBit, Kraken and Gemini.
Similar to CME Bitcoin Futures, one contract will be worth five BTC. The platform plans to launch vanilla options, which means that they cannot be executed before the expiration date (settlement). The minimal price tick is five index points equal to $25.
“We’re working to launch options on those futures. The option on the Bitcoin future will give the holder of that option, either a put or a call, the right “” but not necessarily the obligation, to either purchase or sell the underlying futures contracts at maturity,” McCourt, CME Group Managing Director, said in the recent interview as cited by Cointelegraph.
According to McCourt, bitcoin options will have the same expiration dates as their underlying bitcoin futures. The same applies to trading hours.
“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,” according to the official announcement.
However, the specifications are subject to change before the launch date. Currently, CME is discussing the parameters of the new instrument with regulatory authorities.
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