Cboe is planning to launch its bitcoin derivatives product. It’ll be sold under the ticker XBT. Many people are wondering how this will impact current spot markets and the bitcoin economy as a whole. So far the price has spiked quite a bit, and many speculators believe the favorable price is due to the upcoming futures markets. No one can really predict right now how these derivatives markets will affect spot markets, but we can tell you what to expect this week.
The largest U.S. options provider, the Chicago Board Options Exchange (Cboe), is set to launch its bitcoin-based futures products today at 6 pm EDT. Currently, investors and speculators are interested in what will happen when the derivatives products launch, because at the moment there are no open standards for this type of cryptocurrency-based investment vehicle.
Big Time Options Markets Are About to Shoot the Dice With Bitcoin
What You Should Know About Cboe’s Futures
Futures will be available for trading starting at 6 pm EDT on Sunday, December 10. Investors will be able to trade from 9:30 am to 4:15 pm EDT, and trading is also available during extended hours. There are no bitcoins involved with contracts as all of the trading is cash-settled in USD at settlement times. However, contract sizes are equal to ‘one bitcoin’ based on the USD price of BTC on the Gemini exchange. Futures investors can purchase a minimum of $10 per contract which are tethered to specific time periods.
“The contract multiplier will be 1 so if a contract is trading at parity with bitcoin its worth will be based on current pricing – The minimum tick for a directional, non-spread trade is 10 points or $10, and a spread trade will have a much smaller tick of 0.01 bitcoin or $0.01,” revealed Cboe’s CFA Russell Rhoads this past November.
In Order to Purchase Bitcoin-Based Futures, You Need to Contact a Brokerage Firm
Bitcoin markets are unlike any stock or commodity markets and may shock mainstream investors and Wall Street types.
Cboe’s bitcoin futures listings will be set in three serial months between January through March, with an expiry during the two business days before the third Friday of the closing month. Cboe may also list trading for weekly contracts and quarterly contracts as well. The cut-off time for all orders, quotes, cancellations and order modifications for XBT futures will end at 3:14 pm EDT.
Currently, there are no price limits, but there can be timeouts during trading sessions. This means during extremely volatile times Cboe’s bitcoin future markets can be halted. According to Cboe’s rules, individuals cannot own or have control of more than 5,000 contracts, net long or net short, in XBT. Also, investors cannot hold more than 1,000 contracts net long or short with existing XBT contracts set to expire.
Individuals interested in investing in Cboe’s bitcoin futures products will be charged a basic retail rate of $1 per contract, but for the rest of December, the firm is waiving fees. People and organizations will have to contact their brokerage firm to purchase XBT contracts. However, at the moment many financial institutions are not quite ready to take on the task of selling these futures. Institutional clients can purchase XBT from more prominent brokerage firms like Goldman Sachs and JP Morgan. However, these companies will only offer bitcoin futures to a particular group of customers at the moment.
Will Futures be Positive, Negative, or Tame the Bitcoin Beast?
As we mentioned above, nobody knows what these futures markets will do to pre-existing spot market prices. People assume it will be positive, and many believe it will be negative, and others believe it will be just enough to ‘tame’ bitcoin’s volatile price.