Chicago’s stock exchange, the CME, announces two new one-tenth crypto derivative products on Bitcoin (BTC) and Ethereum (ETH): micro options
The Chicago CME announces new micro options with underlying Micro Bitcoin and Ethereum futures
The Chicago Mercantile Exchange (CME) is a Chicago-based exchange with now the world’s largest exchange of options and futures contracts. It is famous for being the first Western exchange in the world, along with the CBOE, to launch Bitcoin futures contracts in December 2017.
It has also been very active in crypto derivatives for some time now, so much so that the only Bitcoin ETFs approved in the US have CME BTC futures as collateral.
A couple of days ago it announced the launch of a new crypto product.
These are micro-sized options on BTC and ETH, based on Micro Bitcoin and Micro Ether futures.
Full details of these new financial derivative products have been published on the CME Group website.
The advantages offered to speculators by these new instruments are firstly greater precision, as the underlying contracts are 1/10th the size of BTC or ETH, but also greater versatility, as there are both monthly and weekly options.
The company states:
“Building on the strength and liquidity of Micro Bitcoin and Micro Ether futures, these options contracts enable market participants to efficiently hedge market-moving events with greater precision and flexibility, enabling traders of all sizes to access crypto market exposure”.
Indeed, traditional derivative financial instrument contracts on Bitcoin and Ethereum are often priced high due to the fact that the underlying is one or more BTC or ETH. This makes such instruments inaccessible to many small retail speculators.
On spot markets, where this limit does not exist, it is not possible to take advantage of all the features of futures and options contracts, such as short selling.
The advantages of micro futures and micro options
With micro futures and micro options, the limitations are greatly reduced while maintaining the advanced functionality.
Tim McCourt, Global Head of Equity and FX Products at CME Group, explained that the liquidity in the market for their Micro Bitcoin and Micro Ether futures is now significant, making it possible to open up the micro options market as well.
After all, more and more speculators are interested in using more sophisticated investment instruments, so this interest is not surprising. The fact that these speculators include more and more retail investors fully justifies the decision to issue new instruments on the market that are also suitable for smaller portfolios.
It is worth noting that all of the products available at the CME are fully regulated, so they can potentially be used by anyone.